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Dr. Doom: The world will fall into a long and ugly recession, S&P may fall 40% |

Dr. Doom: The world will fall into a long and ugly recession, S&P may fall 40% |
Dr. Doom: The world will fall into a long and ugly recession, S&P may fall 40% |

“Dr. Doom” Roubini, who accurately predicted the financial tsunami in 2008, said the global economy, including the U.S., will fall into a “long and ugly” recession by the end of this year, and it will not be able to get out of it throughout 2023, S&P said. The 500 is on the verge of a sharp correction of a 40% slump.

“Even in an ordinary recession, the S&P 500 could drop by 30%,” Robini said in an interview on Monday (19th). “If it’s a real hard landing, it could drop 40%.”

The chairman and CEO of Roubini Macro Associates believes that just by looking at the huge debt ratio of US companies and the government, it is known that the US economy will not be just a mild recession. As interest rates and debt-servicing costs rise, “a lot of zombie institutions, zombie families, businesses, banks, shadow banks, zombie states are all going to die. It’s going to be seen who’s swimming naked.”

Robini sees an “impossible mission” for the Fed to hit its 2% inflation target and keep the economy from a hard landing, predicting a 3-yard rate hike (75 basis points) in September , the interest rate will be raised by 2 yards each in November and December. This means that by the end of the year, the target range for the federal funds rate may rise to 4.00-4.25%.

But even so, with wage and service-sector inflation so stubborn, the Fed “may have no choice” but to keep raising rates, moving the federal funds rate toward 5%.

At the same time, the effects of the Russian-Ukrainian war, the Covid-19 epidemic, and China’s zero-removal policy continue to ferment, making borrowing costs higher and economic growth weaker, which means that it will be difficult for the Fed to achieve a “growth recession” (long-term sluggish economic growth and unemployment. rate rises, keeping inflation in check).

Robini said that when the global economy enters a recession, governments will no longer be able to use fiscal stimulus because they have already run out of silver bullets. Moreover, fiscal stimulus in a high-inflation environment will only overheat overall demand.

So,He predicted the stagflation of the 1970s and a repeat of the heavy debt pressures of the global financial tsunami. “It won’t be a short, shallow recession, but a deep, long and ugly recession.”

He predicts that the U.S. and global economies will not emerge from a recession throughout 2023, the extent of which will depend on how severe supply chain shocks and financial stress are. During 2008, households and banks were hit the hardest,This time, corporations and shadow banking (such as hedge funds, private equity, etc.) will be the hardest hit.

Robini’s new book, “Megathreats: Ten Dangerous Trends That Imperil Our Future,” presents 11 medium-term negative shocks that could raise production costs and undermine potential economic growth, including: deglobalization and protectionism; manufacturing relocation from China and Asia to Europe and the United States; aging populations in both advanced and emerging markets; global climate change; US-China decoupling; immigration; recurring epidemics, etc. He believes another outbreak will occur sooner or later.

He advised investors not to place too much weight on stocks and hold more cash. While the value of cash will be eroded by inflation, it’s still better than stocks and other assets that could lose 10%, 20%, or even 30%. In fixed income, it is recommended to stay away from long-term government bonds and increase short-term government bonds or anti-inflation bonds (TIPS).

Tags: Doom world fall long ugly recession fall

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