Why Wall Street's Dr. Doom now wants to be Dr. Boom

Business Insider

13 hours ago

Wall Street has been calling him "Dr. Doom" for 17 years, but Nouriel Roubini — the economist famous for his persistently bearish and frequently dystopian takes on the world economy — is sounding surprisingly positive lately.
He's rescinded his earlier call for a recession, and now sees a US tech and artificial intelligence investment boom unfolding that will uplift the economy through the rest of this decade.
By 2030, Roubini thinks economic growth in the US will double from around 2% to 4%, while productivity growth surges from around 1.9% to 3%. The stock market is also likely to climb higher, he told Business Insider in an interview, predicting the S&P 500 would see high single-digit percentage growth in 2025, on par with its historical return.
It's a sharp turnaround from the gloomy forecasts he' is known for. Roubini told BI the nickname started to stick in 2008, when the New York Times referred to him as " Dr. Doom" after he correctly called the Great Financial Crisis, he told BI.
"Even before, I always said I'm not Dr. Doom and I'm Dr. Realist, first of all," Roubini said. He said that he's made numerous forecasts that were more bullish than the consensus throughout the years when the evidence lines up. "So I don't know why people think that I'm always Dr. Doom. It's not the case."
His outlook, though, has brightened considerably since 2022. Back then, he appeared on TV and penned op-eds warning of a coming stagflationary debt crisis. At the time, he described the turmoil he saw looming as an all-in-one financial crisis involving spiraling debt levels, soaring inflation, and a severe recession.
Roubini told BI there are a few things that have gotten him to change his tune.
1. Artificial Intelligence
Roubini says he began to hear the murmurs of the AI revolution well before ChatGPT went viral at the end of 2022. In his 2022 book, "Megathreats," he acknowledged the potential for artificial intelligence to significantly boost economic growth and serve as a major tailwind for markets.
That's become a reality way faster than Roubini expected, and a major reason he's become more bullish, he told BI.
He believes the economy could start to reap the growth and productivity benefits of AI in the next several years, particularly as humanoid robots enter the mainstream.
2. An energy revolution
A breakthrough in fusion energy would be another bullish force for the economy, Roubini said.
Fusion energy hasn't been achieved yet, but tech firms are pouring vast sums of money into making it happen. Chevron and Google contributed to a more than $150 million funding round this week for TAE Technologies, a fusion energy company that plans to have a working prototype power plant by the early 2030s. Type One Energy, another fusion energy firm, also plans to roll out a power plant by the middle of the next decade.
"We're not in an AI winter anymore. We had the fusion winter for 40 years. We're not anymore," Roubini said, pointing to the stagnation in tech and fusion energy development is the past. "Now it's happening."
3. Markets are checking Trump
President Donald Trump's tariffs may not be as harmful to the US economy as some investors think, Roubini says. He thinks it's more likely that markets will throw a tantrum and force Trump to walk back his most aggressive policies.
That's already happened a few times this year. Roubini pointed to sharp sell-offs in the bond market that preceded Trump's 90-day pause of his "Liberation Day" tariffs, and the softening of his tone regarding firing Jerome Powell.
"That means the bond vigilantes are the most powerful people in the world," Roubini said. "The instincts might be very bad, but then, markets are unforgiving," he added of policymakers.
Roubini speculates that tariffs on China, for instance, could wind up somewhere around 39%, well-below the 145% tariff rate Trump proposed earlier in the year.
Meanwhile, AI, quantum computing, and other tech advancements in the US can more than offset the impact of the trade war, Roubini said. Tariffs are expected to drag down GDP growth by 0.06% a year through 2035, according to estimates from the Congressional Budget Office. It's a fraction of the 2 percentage point increase in growth Roubini expects to see by the end of the decade.
Roubini now pegs the odds of a recession to just around 25%. Even if the US enters a downturn this year, Roubini says he expects it to be shallow and short, as the Fed can cut interest rates to boost the economy, while tech powers growth over the long-run.
That's not to say Dr. Doom has shed all of his bearish views. Roubini says many of the things he feared several years ago — stagflation, spiraling government debt levels, and rising geopolitical conflict — still loom.
He rattled off a list of potential risks the US could conceivably face in the future: migration controls fueling stagflation in the economy, the US dollar collapsing in value, and China and the US not reaching a trade agreement and seeing an escalating cold war, to name a few scenarios.
"So there's plenty of stuff in the world that can go wrong," he said.