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uh for the rest of the year I will be shorting us STS noral Ruben expressed his concern and suggested shorting the stock he isn't the only one several economists have warned the US government and its citizens about the state of the economy for several years the fact that the US economy is in big trouble is getting more evident which is why popular Economist noral ruiny expressed his concern and suggested shorting the stock I will share his reasons behind this claim and suggestions in this video during an interview with Bloomberg TV Economist noral rubini made the shocking revelation of cutting short US Stocks through the remainder of 2023 affirming his prediction that a 10% decline is likely let's hear it from ru Beni you talked about a 10% decline in equities we're going to switch up the pace fast answer rapid fire here I want to get to that call tell me where you land on stocks at this moment would you want to be shorting or going long American stocks uh for the rest of the year I will be shorting US Stocks all right and is that a 10% decline is that still about where you think we could land uh it's it's highly possible given what's happening in us and the global economy and Rising o prices and inflation being still sticky and the fed and other central banks not being done yet popularly called Dr Doom for a convincing reason Ruben is a Prof professor of Economics at the New York University Stern School of Business and the CEO of rubini macro Associates he is known for his prophetic economic forecasts as we all know this man spotted the 2008 US housing bust and the subsequent great financial crisis heat has warned the nation since 2022 that a US recession is inevitable and a global stagflationary debt will follow he even explained explain how the stock will be affected by the economic recession and the sharp drop in the S and p500 despite a recent rebound from its October low Ruben shared his perspective in this clip well you know even if you had a short and shallow recession typically from pck to Thro the S&P 500 Falls by 30% ruvin didn't fail to point at the slower Global growth and a high inflation environment as the current threats to watch out for as they're surely coming even though we felt it intensely while the US Stocks may drop 10% as said other markets around the world may see equities drop off even more let's listen to rubin's claim call just for American stocks noral or globally are you looking Dow on equities well in the rest of the world is even worse than the United States in US you might have a bumpy Landing but in the Euro Zone and UK we're talking about inflation and recession stock inflation China is slowing down sharply so the rest of the world is even worse than the United States you might now think the US economy is bad while the rest of the world is worse but that isn't to make the government relent a 2% inflation rate is impossible according to the New York Times the US has a lower inflation rate of 3.7% compared to England's 3.9% meanwhile that's the UK's lowest in 2 years still it is misconception for the markets to assume the FED will start easing rates this is impossible because of the unpredictable nature of inflation it may rise at any time also oil prices are increasing and there is a potential for another surch as shown in the graph although he expects the FED to maintain its monetary tightness to counteract inflation Ruben does not expect the central bank to bring inflation back towards the 2% Target rate instead the global economy is slipping into an era of stagflationary instability noting that supply and demand s side components will make achieving the 2% rate impossible factors such as restricted migration an aging population geopolitics industrial rering and de globalization will reduce growth and raise production costs meanwhile government spending will also climb to counteract the coming crisis such as growing INE quality and climate change but with the US Federal deficits already surging this will force the FED to monetize debt pressuring inflation he even forecasted that the normal inflation rate would stick around 3% 4% in developed economies let's hear from him the 2% is at this point Mission Impossible and The New Normal may be somewhere between 3 and 4% for advanced economies sta Landing Federal Reserve chair Jerome Powell's characterization of the road ahead for the US economy has been glum since the start of 2022 in March poell targeted a soft Landing where the fed's interest rate hikes would tame inflation without sparking a recession but 2 months later with inflation running hot the Fed chair began waffling saying the economy would probably see something more like a softish landing po acknowledged that his policies would undoubtedly bring some pain to Consumers and businesses leading analysts to believe that the Fed was now targeting a growth recession according to rubini it's much worse than that and any claim for a soft Landing is delusional he predicted the country would have a recession stif flation and other severe financial crisis even more alarmingly he argues that it may not matter if Central Bank officials continue raising rates to fight inflation or if they went out and cut cut rates fearing a recession this trend reached 2023 when commodity prices became more volatile amid climate and geopolitical shocks a serious risk to disinflation between June and late September last year oil prices had increased by about 25% amid extended Supply cuts by the organization of the petroleum exporting countries and selected non-members before falling back by about 11% this will be better explained with the chart provided food prices remain elevated inflicting greater hardship on many lowincome countries geoeconomic fragmentation has also led to a sharp increase in the dispersion of commodity prices across regions including critical minerals this could pose severe macroeconomic risks including to The Climate transition and while both underline and headline inflation have decreased they remain uncomfortably high near-term in inflation expectations have risen above Target although they now appear to be turning a corner in addition many countries have eroded fiscal buffers with elevated debt levels Rising funding costs slowing growth and an increasing mismatch between the growing demands on the state and available fiscal resources this leaves many countries including the us more vulnerable the crisis and demands A Renewed focus on managing fiscal risks the the economy is getting worse The Economist believes that the FED isn't willing to do what it takes to prevent this stagflationary era and will eventually give up on raising interest rates because there will be more than just some paying coming for the global economy according to him this is just the beginning of the pain the real one might crack up a major financial institution and make it go under He also mentioned the Layman effect remembering the epic crash of 2008 Ruby was referencing the collapse of 161 year-old Financial Services Powerhouse Layman Brothers a moment widely seen as the turning point that led to the great financial crisis leman's bankruptcy led to a 4.5% one-day drop in the Dow Jones Industrial Average on September 15 2008 it caused Mass withdrawals from Mutual Funds leading many banks to the edge of failure the FED responded to to the Collapse by slashing interest rates and stepping in to save other banks at the same time Congress passed the 700 billion troubled asset relief program to stabilize the financial system rubini believes that if another lemon level financial institution goes bust this time the FED will stick to its old Playbook and wimp out on rate hikes let's hear directly from him and the economy is slowing down very sharply I don't think they'll be able to be tough on inflation they're going to wimp out and they're going to dodge it and they're going to postpone any finishing of tapering or raising rates ruan's suggestion could work still he noted that if he were leading the FED he would continue raising interest rates to fight inflation no matter the costs because a return to the high inflation and low growth of the 1970s would be a disaster let's hear what he said what they should be doing is actually hiking rates all the way to Le 575 the signals are telling us right now is they're not sure whether they want even to hike more if that happens there could be a de anchoring of inflation expectation you could have a true stock inflation with this it is more sensible to hike the rate even though more rate hikes will surely cause a recession however avoid stagflation rather than avoid stagflation and go for a more severe recession in the 1980s for example thenf Fed chair Paul vulker took a hard yline stance against the stagflation that played the US economy during the prior decade and his policies sparked a double dip recession as prices continue to increase across a broad range of spending categories many Americans find that their paychecks aren't going as far as they used to that's probably because in June 2022 the year-over-year inflation rate as measured by the Consumer Price Index was a whopping 9.1% the highest that's been in over four decades the graph will illustrate the data for better understanding gas price decline although the gas price is sinking inflation was mostly unchanged due to underlying price pressures like apartment rents restaurant meals and many other services which remained stubbornly High most economists expect the rate of price increases to keep slowing in the coming months though the decline could follow a bumpy path they want inflation to fall closer to the fed's 2% Target by the end of 2024 wages and rental prices among other items are gradually increasing in November 2023 much cheaper gas held down overall prices which rose 0.1% from October compared with a year ago inflation dipped to 3.1% down from a 3.2% year-over-year rise in October as shown in the chart according to the American Automobile Association AAA the national average for gas prices stood just below $325 that's down 25 cents from a month ago and 30 cents less than last year experts point to a recent decline in oil prices and a seasonal dip in demand as well as easing inflation according to Patrick Dean head of petroleum analysis at gas budy each penny decline in the national average aage saves motorists close to $3.8 million but does that ease inflation prices in the vast service sector though still surge uncomfortably fast core prices which exclude volatile food and energy costs and are considered a better Guide to the path of inflation Rose 0.3% from October to November slightly faster than the 0.2% increased the previous month as shown in the graph stock market and leap years while there is no significant reason why stocks behave in such a particular fashion during a leap year the seasonality effect is too strong to ignore leap has a rich history of depressing investors with big crashes as was noticed in 1992 2000 2008 and even 2020 a study of market performance since 1984 revealed that the average annual returns in all 10 leap years have been less less than 8% while the returns in non-leap years have been much higher at 23% the pictorial representation is in the chart the labor market is the primary risk for the stock market in 2024 consumers already suffer from higher prices after such a prolonged period of inflation so a sharp rise in unemployment would severely impair consumers and risk the Market's ability to hit the lofty earnings predictions that are currently being being forecasted inflation needs to show continued Improvement additional interest rate hikes are more likely if it doesn't which will present a headwind for stock valuations a few interesting data points on the inflation front also bear watching for instance while Consumer Price Index data for November show shelter costs increased 6.5% yearly the Real Estate website zillow's observed rent index Rose 3 .3% over the same period it is depicted on the graph as ruin said other market stocks declined more than the US stocks in Europe and Wall Street fell along with prices for US Government debt on ebing Market optimism about timely interest rate cuts from the Federal Reserve according to yabu finance the dollar jumped against major currencies as the yield on the 10-year treasury note which moves inversely to price rebounded to trade above 4% early in the day a sign of Lowered Expectations for rate Cuts this year the government is trying to assure the nation and its citizens that nothing is wrong at the same time rubini warns us about the Peril the country is in should we be rest assured that the FED will fix it it's a split decision if you found this video insightful don't forget to like And subscribe for more financial tips see you at the next one
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