By Sam Boughedda
Nouriel Roubini, an economist who predicted the 2008 financial crash, said he believes there is a "long and ugly" recession occurring in both the US and globally at the end of 2022, which could potentially continue through the whole of 2023.
In an interview reported by Bloomberg, Roubini said it could cause a sharp correction in the S&P 500 by 30%, "even in a plain vanilla recession." However, in his expectation of a "real hard landing," the S&P 500 could decline 40%.
The chairman and chief executive officer of Roubini Macro Associates, nicknamed Dr. Doom following his 2008 prediction, warned that anyone expecting a shallow US recession should examine the extensive debt ratios of corporations and governments.
Roubini added that as rates increase and debt servicing costs grow, "many zombie institutions, zombie households, corporates, banks, shadow banks and zombie countries are going to die." Meanwhile, he believes getting to a 2% inflation rate will be a "mission impossible" for the Federal Reserve, and he expects a 75bps rate hike at the current meeting and a 50bps increase in November and December.
Roubini believes inflation means the Fed probably has no choice but to continue increasing rates, and when the world is in recession, he does not believe fiscal stimulus will be able to help as governments with too much debt are "running out of fiscal bullets," resulting in stagflation.
"It's not going to be a short and shallow recession, it's going to be severe, long and ugly," Bloomberg quoted Roubini as saying.