Latest news with #Megathreats
Yahoo
3 days ago
- Business
- Yahoo
Why Wall Street's Dr. Doom now wants to be Dr. Boom
Nouriel Roubini, who's been known as "Dr. Doom" for 17 years, is feeling more upbeat. The economist has scaled back his recession call and thinks the US is headed for an investment boom. He told BI there are three things that have driven his newfound optimism. 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 He's rescinded his earlier call for a recession, and now sees a US tech and artificial intelligence investment boom unfolding that will uplift the economy through the rest of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. 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. 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." 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. Read the original article on Business Insider
Business Insider
3 days ago
- Business
- Business Insider
Why Wall Street's Dr. Doom now wants to be Dr. Boom
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.
Mint
05-05-2025
- Business
- Mint
Nouriel Roubini: US economic tailwinds will help it overcome tariff headwinds
Last December, I argued that while some of US President Donald Trump's policies would be stagflationary (reducing growth and raising inflation), such effects would ultimately be mitigated by four factors: market discipline, an independent US Federal Reserve, the president's own advisors and the Republicans' thin majorities in Congress. The script has played out as predicted. The reaction from stock, bond, credit and currency markets forced Trump not only to back down from his 'reciprocal' tariffs against most of America's trade partners, but also to beg China to sit down and negotiate. In the game of chicken between Trump and Chinese President Xi Jinping, Trump lost. Market traders trumped the tariffs, and bond vigilantes proved more powerful even than the US president—just as the political strategist James Carville observed a quarter-century ago. Then came the game of chicken with Fed Chair Jerome Powell. Again, Trump was the first to blink. Markets swooned when he suggested that he would fire Powell, and he soon back-pedalled, declaring that he has 'no intention" of doing so. Meanwhile, Powell has made clear that the president has no lawful authority to remove him. Similarly, while [trade extremists] like Peter Navarro, Trump's main trade advisor, initially gained the upper hand—appealing to Trump's self-image as 'Tariff Man'—this did not last. Once markets stumbled, those advocating an 'escalate to de-escalate' tariff strategy, such as treasury secretary Scott Bessent and Stephen Miran, the chair of the Council of Economic Advisers (a former colleague of mine), seemed to prevail. Finally, some congressional Republicans have come out in support of legislation to limit the president's authority to impose tariffs, and many other political players are suing the administration for what they describe as an unlawful overreach. Beyond these four guard-rails, there is also the tech factor. The US economy's potential growth will approach 4% by 2030, far above the International Monetary Fund's recent estimate of 1.8%. The reason: America is the world leader in 10 of the 12 industries that will define the future, with China leading in only electric vehicles and other green tech. US growth averaged 2.8% in 2023-24, and productivity growth has averaged 1.9% since 2019, despite the pandemic-era dip. Since the launch of ChatGPT in late 2022—which I predicted in my book, Megathreats —AI- related investments have driven a US capex boom. Even tariffs and the resulting uncertainty have not fundamentally changed the guidance from most Big Tech firms, AI hyper-scalers and others. Many are even doubling down on AI investments. If growth goes from 2% to 4% because of technology, that is a major boost. Yet, even draconian trade protections and migration curbs would reduce potential growth by only 50 basis points at most. That is a four-to-one ratio between positives and negatives; technology would trump the tariffs over the medium term. As I recently argued elsewhere, even if Mickey Mouse were president, the US would still be on the way to 4% growth, because US private-sector innovation promises to offset bad policies and erratic policymaking. The AI investment boom also implies that, with or without high tariffs, the US current-account deficit will remain high and rising, reflecting the difference between sluggish savings and booming investment. But since America's exceptional growth will survive Trump, portfolio inflows will continue despite the trade-policy noise. Although fixed-income investors may pull out of US assets and the dollar, equity investors will remain overweight on US assets, perhaps even doubling down. Any substantial weakening of the dollar will be gradual, and it will not suddenly lose its role as the global reserve currency. Over time, higher growth, combined with redistribution policies, will weaken populist forces in the US. Meanwhile, Europe will continue to face the headwinds of demographic ageing, energy dependence, an overreliance on Chinese markets, weak domestic innovation and stagnant growth hovering around 1%. The 50-year innovation gap between America and Europe will only widen as AI-driven growth turns exponential. In this context, hard-right populist parties may well take over in most of Europe, as they already have done in some countries. With the US apparently drifting toward illiberalism, Europe might currently look like the world's last bastion of liberal democracy; but this narrative could be flipped over the medium term. Such an inversion becomes more likely if Europeans continue to ignore the recommendations by former Italian prime ministers Enrico Letta and Mario Draghi. In his report on European competitiveness last year, Draghi pointed out that inter-EU tariffs on goods and services are much higher than the ones Trump has threatened. One silver lining to Trump's bullying is that it could force Europe to wake up. To be sure, US inflation will surge above 4% this year. Trade deals with most countries will limit the tariff rate to an undesirable but manageable 10-15% level, and a likely de-escalation with China will leave that rate at around 60%, on average, driving a gradual decoupling of the two economies. The ensuing shock to inflation-adjusted disposable incomes will stall growth by the fourth quarter of this year, perhaps leading to a shallow US recession that will last for a couple of quarters. But a Fed that remains credibly committed to anchoring inflation expectations will be able to cut rates once growth stalls, and a modest rise in the unemployment rate will weaken inflation. By the middle of 2026, US growth will be experiencing a strong recovery, but Trump would have been damaged politically, auguring a loss for his party in the midterm elections. Fears of the US descending into autocracy will be alleviated. American democracy will survive the Trump shock, and, after an initial period of pain, the US economy will thrive. ©2025/Project Syndicate The author is professor emeritus of economics at New York University's Stern School of Business and author of 'MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them'.
