While the markets have enjoyed a short-term boost following the confirmation of Donald Trump’s second presidency, analysts are still not convinced about what it is. it means for the long-term economy.
Perhaps unsurprisingly, the man has earned the nickname “Dr Doom” for himself. usually dark predictions has a dark outlook.
Dr. Doom—real name Nouriel Roubini—got his nickname after 2006 notice of a housing correction and the coming recessions, which was initially laughed at.
Of course, a few years later, his prediction came true with the Global Financial Crisis, and markets have heeded his insights ever since.
With the countdown to The return of Trump The Oval OfficeRoubini is predicting what will happen in a Republican administration—and it’s not good.
“Some of Trump’s economic policies could lead to significant economic growth,” Roubini said Bloomberg this week
But he replied: “Unfortunately, many other policies will have the consequences of higher inflation and lower economic growth.
“It is the first thing he has already announced Mexican, Canadian rates will apply and China and that is only the beginning”.
In fact, even the key European trading partners will not avoid this treatment.
Reuters reported As Trump discussed new terms with “nice little European countries” last month, he told a rally in Pennsylvania: “They don’t take our cars. They don’t take our farm produce. They sell millions and millions of cars in the United States. No, no, no , they will have to pay a big price.”
Roubini too He listed other Trump policies that he believes will raise prices: making some permanent tax cutsif the dollar weakens, and Impeding Fed independence.
He continued: “Pulling out of the Paris Agreement will make climate change much worse (and) increase food prices and things like that.
“So if you look at this list of policies … they all have the effect that over time inflation will be higher, growth will be lower.”
Explaining how investment advice is derived from its consultancy Roubini Macro Associates it will change as a result, as the professor emeritus of New York University explained: “If you look at this list of policies and others, they all have the effect that over time inflation will be higher, growth will be lower.
“That is a standard analysis of what will be the result of these policies.
“So we have to worry about … a scenario where long-dated bond yields can go much higher than 4%, 6%, 7%, 8%, and inflation is 2% to 3%. 4%, 5%.”
That course would not be welcome for consumers who have had to navigate high housing costs and inflated food prices—especially now that they are seeing the rates normalize back to the Fed’s 2% target.
Inflation + low growth = stagflation
Roubini also has concerns about Trump’s mass-deportation proposals, saying, “In recent years, the increase in migration has held back legal wage growth, increased the labor supply, increased economic growth.
“So definitely the mass deportation is stagflationary.”
Although on the darker end of the prediction scale, Roubini is not alone in his concerns about the shutdown.
Although his concerns have nothing to do with Trump’s policies, JPMorgan’s CEO Even Jamie Dimon sees stagflation down the line.
“I look at the amount of fiscal and monetary stimulus over the last five years, it’s been so extraordinary, how can you tell me it won’t lead to stagflation?” he told AllianceBernstein’s Strategic Decisions conference in May.
“Maybe not,” he said. “But I, for one, am quite prepared for it.”
