The economist Nouriel Roubini, who predicted the 2008 crisis, has issued a warning about what could happen in the coming months. The expert believes that there will be a recession “long and ugly” what would start at the end of 2022 and that would last throughout 2023. It would start in the United States and spread to the rest of the world.
In this regard, Roubini warns that the S&P 500 index (which brings together the 500 largest companies in the US) could suffer a collapse of between 30% and 40% depending on the magnitude of the recession.
“In a simple recession, the S&P 500 can fall 30%but if the landing is really hard, you could do it a 40%”says the president and CEO of Roubini Macro Associates.
Debt and rate hike
According to the economist, the problem lies in the corporate and government debtwhose burden will become more difficult to bear with the increase of the interest rates: “Many zombie institutions, zombie homes, companies, banks, shadow banks and zombie countries are going to fall”underlines.
Roubini thinks that achieving reduce inflation to a rate of 2% without serious consequences in terms of growth it will be a “mission Impossible” for the US central bank: the Federal Reserve (Fed).
“A severe, long and ugly recession”
As for the future interest rate hikes by the Fed, the expert believes that, given the inflation persistent, the Fed will “probably have no choice” but to raise them further, up to close to 5%.
Once the economy is immersed in the recession scenario, the economist does not believe that there will be large fiscal stimuli for two reasons: the high level of government debt and its negative effect when it comes to curbing inflation.
In short, according to Nouriel Roubini’s analysis, the current macroeconomic context will push the world to a recession that “it is not going to be a short and superficial recession, it is going to be severe, long and ugly”.