Although the market received a short-term boost after confirming the news of Trump's reelection, analysts are not yet sure what this means for the long-term economy.
For Nouriel Roubini, who earned the nickname "Dr. Doom" for his consistently pessimistic predictions, the outlook is undoubtedly bleak, which may not be surprising.
Roubini gained this title after warning of the housing market correction and the impending economic recession in 2006, a warning that was initially laughed off.
Years later, with the outbreak of the global financial crisis, his predictions came true. Since then, the market has closely monitored his insights.
As Trump counts down to his return to the Oval Office, Roubini begins to predict what might happen under a Republican administration, and the outlook is not good.
"Some of Trump's economic policies may drive rapid economic growth," Roubini told Bloomberg this week.
But he countered, "Unfortunately, many other policies will mean higher inflation and lower economic growth."
He pointed out, "The first thing he (Trump) has announced is tariffs on Mexico, Canada, and China, and this is just the beginning."
In fact, even America's major European trading partners will not escape this treatment.
Last month, Reuters reported that Trump is considering a new agreement with "beautiful little European countries," saying at a rally in Pennsylvania, "They don’t buy our cars, don’t buy our agricultural products, and sell millions of cars in the U.S. No, no, no, they will have to pay a heavy price."
Roubini also listed a series of other Trump policies he believes will drive up prices: making certain tax cuts permanent, potentially weakening the dollar, and interfering with the independence of the Federal Reserve.
"Exiting the Paris Agreement will worsen climate change, raise food prices, and trigger other issues like that," he continued. "So, if you look at this policy list... all these will have an impact, and over time, inflation will be higher, and growth will be lower."
The NYU professor emeritus outlined how the investment advice of his consulting firm, Roubini Macro Associates, will change, stating, "What we have to worry about is... long-term bond yields could be well above 4%, potentially reaching 6%, 7%, or even 8%, with inflation rising from around 2% to 3%, 4%, or 5%."
Such a process is not good news for consumers who already have to cope with high housing prices and inflated grocery costs—especially since they are just beginning to see interest rates normalize and inflation approach the Federal Reserve's 2% target.
Stagflation risk
Roubini also expressed concern over Trump's proposal for mass deportations of illegal immigrants, stating, "In recent years, the increase in immigration has supported the growth of legal wages, increased the supply of labor, and promoted economic growth. So mass deportation would definitely be stagflationary."
Although Roubini's predictions tend to be pessimistic, he is not the only one concerned about stagflation.
JPMorgan CEO Jamie Dimon's concerns are not related to Trump's policies, but he also believes stagflation is imminent.
At the Leverage Strategy Decision Meeting in May, he stated, "I looked at the number of fiscal and monetary stimulus measures implemented over the past five years—these measures are so unusual, how can you tell me they won't lead to stagflation?"
"Probably not," he said. "But personally, I am ready."
Article shared from: Jinshi Data
