‘Dr. Doom’ foresees potential 40pc drop in S&P 500

Economist Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly” recession in the US and globally occurring at the end of 2022 that could last all of 2023 and a sharp correction in the SP 500 can fall by 30 per cent,” said Roubini, chairman and chief executive officer of Roubini Macro Associates, in an interview this week. In “a real hard landing”, which he expects, it could fall 40 per cent.

As rates rise and debt servicing costs increase, “many zombie institutions, zombie households, corporates, banks, shadow banks and zombie countries are going to die”, he said. “So we’ll see who’s swimming naked.” Once the world is in recession, Roubini doesn’t expect fiscal stimulus remedies as governments with too much debt are “running out of fiscal bullets”. High inflation would also mean that “if you do fiscal stimulus, you’re overheating the aggregate demand”.

“It’s not going to be a short and shallow recession, it’s going to be severe, long and ugly,” he said.Roubini expects the US and global recession to last all of 2023, depending on how severe the supply shocks and financial distress will be. During the 2008 crisis, households and banks took the hardest hits.

Source: Financial Digest (financialdigest.net)

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