- Nouriel Roubini warned the S&P 500 could plunge another 30% before it bottoms out.
- According to Dr. Doom, the US will likely experience a prolonged and deep recession.
- Roubini predicted an inflationary trend, lower growth and headaches from huge debt loads.
Nouriel Roubini warned that the US stock market could fall another 30% if it experiences a prolonged and painful recession.
In a recent article, the economist, known as Dr. Doom for his dire predictions and diagnoses, was noted Fortune interview that the S&P 500 typically dives at least 30% during a recession. If this pattern continues, the benchmark stock index could continue its 21% fall and drop below 3,400 points.
Moreover, Roubini cautioned that an especially harsh economic downturn could send the S&P 500 even lower, to around 2,700 points.
He stated that even if the recession was short-lived and not severe, the market should still fall by 10%. He said, “And if this is as bad the GFC, then another 30%.” He was referring to a global financial crisis that occurred in the aftermath of the housing crash in the mid-2000s.
Roubini stated that stocks could be depressed for many years. Roubini cited huge amounts of private and public debt as well as supply shocks from Russia’s war with Ukraine, and ongoing COVID-19 lockdowns for China. He said that these problems could prevent a rapid economic recovery and market rebound.
He said that “we might be closer to a time like the one between 1973 and 1982 when stocks dropped and stayed very low for a very long period.” “We could see a prolonged crash.”
Roubini suggested that stocks may not be the best option if inflation is high and interest rates are high. Roubini praised short-term bonds and Treasury inflation-protected Securities (TIPS), as well as gold, commodities, real estate, and other alternatives.
Stern, an economics professor from NYU Stern explained why he is so bearish at the moment. According to Stern, the Federal Reserve has never raised rates nor avoided a recession when unemployment was below 5% or inflation was over 5%. According to government data, September saw an increase in inflation of 8% and a decrease in unemployment of 3.5%.
Roubini stated, “History suggests that it’s going be near impossible to avoid hard landing.”
He said that global supply issues are likely to depress growth and increase inflation, making a soft landing less likely. He said that further rate increases could cause further economic and financial fallout by crashing stocks, bonds, credit, or other asset prices.
“You’re not going to get just inflation, but also a recession. What I call theGreat Stagflationary Debt CrisisHe said. “So it’s worse than the 1970s and probably as bad as the GFC.”
Roubini was Sounding the alarmYou can find out more at Incredible global downturnFor a while. He recently published “MegaThreats”: 10 Dangerous Trends that Imperil our Future and How to Survive.
These trends include a shortage for young people to care for the aging population in developed countries, artificial Intelligence rendering millions of workers obsolete and nations creating more barriers to trade and migration.
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