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"Dr. Doom" economist Nouriel Roubini says stocks could plunge another 50% as the US heads towards a severe financial crisis


Nouriel Roubini, an economics professor, speaks at a panel discussion at the SALT conference in Las Vegas May 14, 2014. REUTERS/Rick Wilking

Nouriel Roubini, the economist known as "Dr. Doom", thinks the US is headed for a severe
recession, a crisis that could send stocks falling another 50%.

In a column on Project Syndicate, Roubini said the US had "ample reason to worry" about an impending recession, as the economy was currently showing characteristics of both the 1970s stagflation crisis and as the 2008 recession.

"[The Federal Reserve] will eventually wimp out and accept high inflation," Roubini predicted of the central bank. He calls the prospect of a soft landing for the economy "dangerously naive," noting that the New York Fed places the odds of such a scenario at just 10%, and adds that the combined pressures of inflation and debt could push stocks down another 50%. For investors, that's a grim omen, as the S&P has already experienced its worst half year since 1970.

"In the current context, any rebound – like the one in the last two weeks – should be regarded as a dead-cat bounce," Roubini said -- not an opportunity to buy, like some market optimists have been touting.

"The next crisis will not be like its predecessors," Roubini wrote. "Today, we face supply shocks in a context of much higher debt levels, implying that we are heading for a combination of 1970s-style stagflation and 2008-style debt crises – that is, a stagflationary debt crisis."

The Frankenstein-style financial meltdown, the economist suggests, has been a source of anxiety for economists and central bankers in the past year, as prices continued to rise amid supply-chain pressures. In April, the New York Fed found that the Global Supply Chain Pressure Index surged to 3.29, the first increase since 2021. That was just a month before the CPI clocked in at a record 8.6% for the month of May, the highest hike in prices since 1981.

Roubini has earned a reputation for being exceedingly bearish in the economic realm, earning him the title of "Dr. Doom" or "permabear," as the New York Times referred to him in 2008. Those titles aren't without merit, as Roubini was among the first to sound the alarm in the mid 2000s on the coming Great Recession, calling the housing crisis over a year before the blowup of the subprime mortgage market.

"There is no real riddle to solve," he warned. "Things will get much worse before they get better."

Every “expert” has an “opinion”, and they all vary quite a lot. It’s funny that anytime one of these economy experts says something that is obvious, to even the most oblivious individual, it’s major news. I also wonder which one of these so called experts we are supposed to follow.

When was the last time the prediction from an economist was correct?
Usually they're pretty good at explaining why yesterday happened but their predictions should be taken with a grain of salt.
Will stocks go down more? I'm pretty sure they will. But it might be 20, 30, 40, 50, 60%, or more, or less.

One thing is for sure, they will either go up or they will go down.

Any American residing overseas should be happy. The US $ is stronger against other currencies than it has been in a very long time.

In my opinion we are getting back to reality, this is where the stock market should be. It rose too fast because of the low and non-existent interest rates and because of the stock buy backs after the Tax Cuts and Jobs Act was passed.

Individuals who were chanting the “Made in America” mantra are now just getting a taste of the type of prices they will be paying for their goods without imported products.

Alex wrote: ↑Mon Jul 04, 2022 12:04 pm I'm all for another hearty downturn. The sooner it comes, the sooner it will be over.

Well, we've seen some already....

Given the number of economists, there always have to be a few that are correct.
I don't doubt that there are substantial risks in the market, it doesn't look rosy to me, but I wonder if Dr. Doom has put his money where his mouth is and heavily shorted the market?
I wouldn't dare to.

Nouriel Roubini was right about the 2008 subprime mortgage crash but horrendously wrong dozens and dozens of times before and since.

He is correct less often than a stopped clock, yet CNBC wheel him out every 6 months for more incorrect warnings of impending doom