Roubini predicted the perfect storm for financial markets in 2023
Economist Nouriel Roubini, who predicted the 2008 crisis, believes financial markets are headed for the perfect storm this year – a combination of recession, debt crisis and runaway inflation
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Economist Nouriel Roubini believes that in 2023, American markets will face several negative factors at once – a recession, a debt crisis and uncontrolled inflation, writes business insider. According to him, the combination of these factors will lead to a perfect storm in the financial markets.
The US stock market will continue to decline following the collapse last year, predicts Nouriel Roubini. He had previously warned that the S&P500 might fall another 25% amid a severe US recession. Roubini urged investors to turn their attention to defensive assets by choosing inflation hedges such as gold, inflation-indexed bonds and short-term bonds. According to him, these assets are likely to show better dynamics than stocks and bonds, which will be especially affected if the situation in the economy deteriorates.
The S&P 500 has lost regarding 20% in 2022. Earlier in interview CNN, he predicted that in the coming years, the average inflation rate in the United States would not be 2%, but 6%. And the losses that were last year in bonds and stocks will be even more serious in the coming years, the economist said.
Nouriel Roubini Predicts 25% S&P 500 Collapse Amid Severe Recession
Last year, the US Federal Reserve began raising rates to bring down record inflation. Since March last year, the US regulator raised the discount rate by 450 basis points. Over the past year, the rate has grown from almost zero values to a range of 4.5-4.75%. However, US consumer inflation remains stable at 6.4%. Roubini believes the Fed will need to raise benchmark rates well above 6% for inflation to return to its 2% target.
But such an increase might trigger a severe recession, a stock market crash and a spike in debt defaults, leaving the Fed with no choice but to give up fighting inflation and let prices spiral out of control, the economist said.
According to Roubini, the result will in any case be a recession, followed by new problems with debt and inflation. “Now we are facing the perfect storm: inflation, stagflation, recession and a potential debt crisis,” the economist warned.
Stagflation is a phenomenon that combines three factors: sluggish economic growth or its absence (stagnation), high inflation and unemployment.
Nouriel Roubini is an American economist, professor of economics, taught economics at Yale and the Stern School of Business at New York University, worked at the IMF, the Fed and the World Bank. CEO of the consulting company Roubini Macro Associates in New York, chief economist at Atlas Capital Team LP (Abu Dhabi). Roubini is one of the few economists who predicted the collapse of the US housing bubble in 2007-2008 and the subsequent global crisis.
Marina Mazina.
