Via Goldman:
Conditions for reducing deep tail risks now.
Simplistically, for asset markets to recover sustainably from the current crisis, we think the market will need to be able to put limits on the tail risks that are currently centre-stage and for new tail risks not to surface. The broad challenge is that this crisis is unique in its source and speed – rather than starting in the financial system and emanating out to the real economy, it begins with a sudden stop in the real economy and works its way into financial markets – and it is still possible to imagine scenarios where the stop is longer and leads to much larger economic losses than in our own central case. At a high level, we see six conditions that we think would allow the market to define limits to that uncertainty on some key dimension of the problem.
1. A stabilization or flattening out of the infection rate curve in the US and Europe.
