Canaccord Genuity's Tony Dwyer warns that recession odds are growing.
Dwyer sees the coronavirus outbreak putting the U.S. economy on thin ice.
"If you shut down some of these major cities from business activity, you're going to go into a supply shock and even a demand shock short-term recession," the firm's chief market strategist told CNBC's "Trading Nation" on Tuesday. "The bond market is certainly telling you especially in today's reaction from the Fed that it's scared."
After the Federal Reserve cut its benchmark interest rate Tuesday by a half percentage point, the 10-year Treasury Note yield fell below 1% for the first time ever. It was slightly above the mark early Wednesday. The Fed's emergency move, done two weeks before its March meeting, was in response to the coronavirus impact on global economic growth.
"A rate cut was necessary because the market was commanding it," said Dwyer. "You cannot shut down the second largest economy in the world and think it's all going to be smooth sailing ahead. And, now it's here."
According to Dwyer, the Fed rate cut won't stave off a recession. But he believes it's a vital step to keep the economy working. If a recession strikes, the Fed's preemptive action sets up the economy and markets for a successful rebound, he said.
"The folks printing the money globally are throwing it at you at an historically low rate," he said. "This drop in the long-term interest rates is going to be stimulative on the other side, and I don't want to fade that opportunity through 2020 and into 2021."
Dwyer came into the year as one of Wall Street's biggest bulls. Last December, he boosted his 2020 S&P 500 price target by 90 points to 3,440. But he turned neutral on stocks in late January after the year's early record market rally.
Despite his recession warning, he still predicts stocks will rebound sharply to all-time highs.
"I'm going to be more bullish, not less bullish, coming out of this," Dwyer said. "Now is the time you want to start looking for those names you wish you owned three, four, five months ago that have the opportunity to grow once you come out of this fear-based economic retrenchment."
As of Tuesday's close, 84% of the S&P 500 were in a correction, which translates into a 10% or more drop from 52-week highs.