'Dr. Doom' Nouriel Roubini warns the S&P 500 could plunge another 30% - and the US economy faces a long and painful recession
- Nouriel Roubini warned the S&P 500 could plunge another 30% before it bottoms out.
- The "Dr. Doom" economist said the US is likely to endure a deep, extended recession.
US stocks could plunge another 30% as the economy endures a painful and protracted recession, Nouriel Roubini has warned.
The economist, dubbed "Dr. Doom" for his grim diagnoses and predictions, noted in a recent Fortune interview that the S&P 500 typically dives at least 30% during a recession. If that pattern holds, the benchmark stock index will extend its 21% decline this year, and sink 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.
"Even if it was a short and shallow recession, the market should go down by another 10%," he said. "And if it is as bad as the GFC, then by another 30%," he added, referring to the Global Financial Crisis that followed the mid-2000s housing crash.
Stocks could remain depressed for years, Roubini said. He pointed to huge amounts of public and private debt, and supply shocks from Russia's war with Ukraine and ongoing COVID-19 lockdowns in China. Those headaches could forestall a fast economic recovery and market rebound, he said.
"We might be closer to a period like we saw between 1973 and 1982, where stocks dropped and stayed very, very low for a long time," he said. "We could have a long-term crash."
Stocks might not be the best bet if inflation stays high and interest rates remain elevated, Roubini said. He touted short-term bonds, Treasury inflation-protected securities (TIPS), gold, commodities, and real estate as superior alternatives.
The economics professor at NYU Stern also explained why he's so bearish right now. The Federal Reserve has never raised rates and avoided a recession when inflation was above 5% and unemployment was below 5%, he said. Inflation was above 8% and unemployment was 3.5% in September, government data shows.
"History suggests it's going to be near mission impossible to avoid a hard landing," Roubini said.
He emphasized that global supply pressures are likely depressing growth and fueling inflation, making a soft landing even less likely. Moreover, further rate hikes could crash stocks, bonds, credit, and other asset prices, causing further financial and economic fallout, he said.
"You're going to get not only inflation, not only a recession, but what I call the 'Great Stagflationary Debt Crisis,'" he said. "So it's much worse than the '70s, and it's probably as bad as during the GFC."
Roubini has been sounding the alarm on an epic global downturn for a while. For example, he recently published a book titled "MegaThreats: 10 Dangerous Trends That Imperil Our Future, and How to Survive Them."
Those trends include a shortage of young people to support ageing populations in developed countries, artificial intelligence rendering millions of workers obsolete, and nations erecting more barriers to trade, migration, and flows of capital and information.
Read more: It's the bond market's time to shine
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