Investing.com – The prestigious economist, known in the investment community as ‘Dr. Doom’ (Doctor Catastrophe) for predicting the subprime mortgage crisis that would cause the financial crash of 2008, issues a new warning about the possible return of Donald Trump to the White House.
For Nouriel Roubini, Trump’s victory could cause a stagflation shock. “Trump’s combination of trade, currency, monetary, fiscal, immigration and foreign policies poses much greater risks of stagflationary outcomes than if Kamala Harris is elected,” Roubini warned at the Greenwich Economic Forum in Connecticut last Wednesday.
In statements collected by BloombergRoubini notes that Trump’s policy plans, which include imposing higher tariffs, devaluing the U.S. dollar, and taking a tough stance on illegal immigration, threaten to slow the economy while boosting inflation.
He sees three reasons why traders have so far ignored the risks of a second Trump presidential victory: the close race with Harris, the prospect of a Trump administration tempering its proposals with a more moderate approach, and the possibility of a market sell-off that prevents it from enacting certain policies.
Roubini also points to tensions in the Middle East as a possible catalyst. Further escalation could lead to an increase in oil prices, which would increase price pressures, the economist warns.
To protect against these risks, Roubini recommends investors hold positions in , short-term duration bonds and Treasury inflation-protected securities, or TIPs, he says. Bloomberg.
Roubini has long been a skeptic about rising stock prices, although he is less pessimistic when it comes to American tech giants.
The economist projects that Artificial Intelligence (AI) could boost US productivity growth above 3% by the end of the decade, but much of that optimism is already reflected in stocks.
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