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Investors advised to choose inflation hedges as economist predicts severe recession and stock-market crash

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WHAT YOU NEED TO KNOW!

  • Economist Nouriel Roubini warns of a “perfect storm” brewing in the markets this year.
  • He predicts a stagflationary debt crisis with out-of-control inflation and a severe recession.
  • Roubini advises investors to protect themselves by choosing inflation hedges such as gold and inflation-indexed bonds.

Economist Nouriel Roubini, nicknamed “Dr. Doom” for his predictions of the 2008 recession, has issued a warning that a “perfect storm” is brewing in the markets this year. Roubini believes that the economy is heading towards a stagflationary debt crisis, which would combine the worst aspects of ’70s-style stagflation and the ’08 debt crisis.

In a recent interview with Australia’s ABC, Roubini stated that he expects a stagflationary crisis to emerge this year, and warns of a severe recession, a stock-market crash, and an explosion in debt defaults.

Roubini argues that the US Federal Reserve will need to lift benchmark rates “well above” 6% for inflation to fall back to its 2% target, given that consumer inflation is currently still sticky at 6.4%. However, such a move could trigger a steep recession, a stock-market crash, and an explosion in debt defaults.

This would leave the Fed with no choice but to back off its inflation fight and let prices spiral out of control. The result would be a cycle of debt and inflation problems.


Despite the market’s growing hope that the US could skirt a recession this year, Roubini remains ultrabearish on the economy. While more bullish commentators are making the case for a healthy rebound in the S&P 500, which fell 20% last year, Roubini has previously said the benchmark stock index could slide another 30% as investors battled extreme macro conditions. He believes that the recent sell-off is a sign of things to come, as investors price in higher interest rates from the Fed.

Roubini advises investors to protect themselves by choosing inflation hedges, such as gold, inflation-indexed bonds, and short-term bonds.

He believes that these picks are likely to beat stocks and bonds, which could suffer. In conclusion, the economist warns of a “perfect storm” that includes inflation, stagflation, recession, and a potential debt crisis.

Source: businessinsider.com

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1 Comment

1 Comment

  1. JohnE Holmes

    March 5, 2023 at 10:43 am

    The King Is Dead(Dying)Long Live The King!

    All wishing thinking for bored people who have nothing else to write about.

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