If the coronavirus isn’t contained, a severe global recession is almost certain

The world woke up Monday to the reality that the coronavirus epidemic is going to have a much bigger impact on the global economy than investors and policy makers had assumed. Just how big, no one really knows.

Last week, it seemed as if financial markets believed that COVID-19 would be contained. But new cases in Italy, South Korea and Iran over the weekend undermined that belief. The World Health Organization tried to reassure the public on Monday, saying the disease was not yet a pandemic because it was not spreading in an uncontained way.

No matter, stock markets GDOW, -1.64% SPX, -0.38% and other financial markets BUXX, -0.42% TMUBMUSD10Y, -5.30% GC00, +0.66% were quickly recalibrating the worst-case scenario, one in which hundreds of millions of people would be infected, and millions would die.

Investors are just beginning to price in the possibility of a sharp and nasty global recession that would be followed by a rapid rebound once the disease has run its course. Whenever that will be.