When the moments are of strong uncertainty about the direction of the market and the world economy and strong market declines, investors end up resorting to the opinions of great experts. This happened this week after the United States -launched trade war with the tariff with Donald Trump’s announcements on “Liberation Day.”
Economist Nouriel Roubini, known for his predictions about the global financial crisis of 2008, provides for the drop in the stock market can deepen before the investor’s feeling stabilizesAs US President Donald Trump reduces his attack on global trade.
“The correction can be slightly larger, given uncertainty,” Roubini said at a meeting of economists and business leaders on the banks of the lake as in Cernobbio, Italy. “Even though in the coming weeks it seems that we will start the negotiations, and you have a ‘broken’, I think the market corrects a little more, reaches the bottom of the well.”
Roubini spoke after a settlement that saw S&P 500 suffer its worst day in five years on Thursday, with about $ 3 trillion in market value, after Trump launched the highest rates in over a century. The fall continued on Friday, causing New York bags to fall up to 10% a week.
The “base scenario” for Roubini is that Trump will eventually retreat and cut their rates in half, leaving the US with economic growth in a range of 1% -1.5% this year, in which case the Federal Reserve would keep interest rates on waiting.
“If he is rational, he will decrease tension,” said Roubini, who worked as an economist at the White House during the Clinton government. “He is saying that unless someone makes me a ‘phenomenal’ offer, I won’t retreat, but he has to say that because if he says ‘I will negotiate and reduce tension’, he loses his influence.”
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One problem there, according to Mohammed El-Erian, is that the Countries can be reluctant to offer concessions to Trump If they see the process as prolonged.
“The decrease in tension requires that both sides play together, and for that there has to be confidence that this is not a multiple round where it has to renegotiate every time,” the president of Queens’ College, Cambridge told Bloomberg Television in an interview. “This is not there now.”
Trump himself gave a few signs of position change in a social Truth post on Friday. “For the many investors coming to the United States and invest huge amounts of money, my policies will never change,” he said.
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Despite all the drama in the US action markets, Roubini noted that Trump is not as focused on action as he used to be, giving her time to resist before changing course.
“He cares more about the title market and the dollar,” he said. “Most of the stock market is owned by 10% of the population. So a stock market correction does not matter, while lower securities income is good for their base that has mortgages, student loans, car loans, credit cards, personal loans.”
Howard Marks, co -president of the Oaktree Capital Council and co -founder, cited deep uncertainty about almost everything except inflation, like a barrier to predict what the Trump 2.0 era will be like.
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“We know much less today than usual” about what to precet in investment decisions, after the world economy was “shaken like a snowball for the events of recent days,” Marks said in an interview on Friday at Bloomberg TV.
Mark said the latest rates imposed by President Donald Trump helped trigger a waterfall of unknown factors for investors to ponder by choosing where to apply money.
This, he said, is due to the task impossible to predict not only the future of US fiscal policy, but also the way other countries respond.
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“I dare say that if you tell us what our own rules will be in six months, I bet it will be wrong,” said Marks.
Trump is known for reviewing and backing back into policy, and he has already indicated that he would consider changing tariff policies on an ad-hoc base, awaiting negotiations with foreign governments.
Although financial forecasts and investment decisions always involve conjectures and assumptions, Marks said, it is “excessively difficult” to make predictions today, given the many change variables in play in increasing negotiations around tariffs.
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Amid the uncertainty, Marks is confident that the tariffs will likely to stir the fire from inflation. He cited the period of the last 25 years when the cost of durable goods has fallen in terms adjusted by inflation.
(with Bloomberg)