Economist Nouriel Roubini, nicknamed “Dr. Doom” for his accurate predictions of the 2008 recession, has warned that a “perfect storm” is brewing in markets this year.
Roubini believes that a stagflationary debt crisis is imminent, combining the worst aspects of 1970s-style stagflation and the 2008 debt crisis.
He estimates that the Federal Reserve would need to lift benchmark rates “well above” 6% to bring consumer inflation back to its 2% target, which could trigger a severe recession, a stock-market crash, and an explosion in debt defaults.
Roubini urges investors to protect themselves with inflation hedges such as gold and inflation-indexed bonds.
Insider reported:
A “perfect storm” is brewing, and markets this year are going to get hit with a recession, a debt crisis, and out-of-control inflation, the economist Nouriel “Dr. Doom” Roubini said.
“I do believe that a stagflationary crisis is going to emerge this year,” Roubini said Thursday in an interview with Australia’s ABC.
With consumer inflation still sticky at 6.4%, Roubini said he estimated that the Federal Reserve would need to lift benchmark rates “well above” 6% for inflation to fall back to its 2% target.
That could spark a severe recession, a stock-market crash, and an explosion in debt defaults, leaving the Fed with no choice but to back off its inflation fight and let prices spiral out of control, he added. The result would be a steep recession, anyway, followed by more debt and inflation problems.
“Now we’re facing the perfect storm: inflation, stagflation, recession, and a potential debt crisis,” Roubini said.
He has remained ultrabearish on the economy, despite the market’s growing hope that the US could skirt a recession this year.
“They will continue to go down,” he said of stocks, pointing to the recent sell-off as investors priced in higher interest rates from the Fed. “The market is already correcting.”
