“Dr. Doom” Says Stocks Will Decline 25% if the US Economy Dips Into Recession

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US gross domestic product declined 4.3% from its peak in the fourth quarter of 2007 to its trough in the second quarter of 2009, the deepest recession since World War II, according to the Federal Reserve

Warnings from major banks and CEOs about recession and stock-market losses for 2023 were prevalent as 2022 comes to an end, and the Federal Reserve plans its last rate hike of the year. JPMorgan CEO Jamie Dimon this week said with inflation “eroding everything” and consumer savings drawing lower, the economy looks poised to run into a mild to hard recession. 

“Sometimes, of course, there are false alarms,” said Roubini. “But I think that the most important thing is that in the last 60 years, there’s never been a case in US history that you have inflation above 5 percent – right now 7.7 – unemployment below 5 percent – now 3.7 – that when the Fed starts to raise interest rates, you get a soft landing. You get in every case a hard landing,” he said. 

Roubini also expects to see stress in credit markets if the US were to enter a recession, with pressure on “lots of institutions like corporates, households, businesses that are highly leveraged.”