Nourriel Roubini, the economist who predicted the 2008 global financial collapse to win the nickname of Dr Doom himself, warned the traders to rely on the Federal Reserve for a rapid resolution of the instability of the financial market triggered by President Donald Trump’s prices on international trade.
A week ago, Trump announced scanning prices against many nations, including a heavy lick on Chinese imports which has now been raised to 104%. The financial markets that have made concerns about concerns will lead to the recession of the United States and other economies.
The Nasdaq 100 lost 12% and Bitcoin (BTC), the largest cryptocurrency per market value, dropped by 10%, reaching prices less than $ 75,000 at a given time. Volatility on the US Treasury market has exploded, with yields on long -term bonds by increasing, sending lower prices, even if the stock markets were vanishing. This raised fears of a full -fledged liquidity crisis such as that observed five years ago during the cocovid accident.
Speculation is widespread that the federal reserve will soon take measures to facilitate liquidity conditions, as it did in 2020, by putting a floor under the prices of assets. Traders have evaluated at least five interest rate reductions in the quarter point of the president of the Fed Jerome Powell for this year, according to the Fedwatch tool of the CME. Roubini suggests that this will not happen.
“There is, of course, a chicken game between the Trump put and the Powell. But I would say that the exercise price of the Powell Put will be lower than the exercise price for the Trump, which means that Powell will wait for Trump who is blinking,” Roubini in Bloomberg told Bloomberg.
In other words, Powell will probably wait for Trump to temper his rhetoric before intervening to stabilize market volatility. This approach is logical since current market instability is largely the result of Trump prices.
The feeling could quickly be reversed with a unique media publication of Trump announcing a possible trade agreement or a negotiation with China. An episode of the beginning of this week is symptomatic. On Monday, an unconfirmed report of a pricing break sparked a sharp increase in market assessments, only for the news to be demystified later as false.
Sticky inflation, no recession
Roubini, who directs Roubini Macro Associates, expects inflation to be sticky in a new world of higher prices, injuring long -term obligations. This partly explains the fainting in the notes of the American treasury of 10 and 30 years and the overvoltage which results from the yields.
At the same time, he said that he expects the United States to avoid slipping into a recession, unlike the market Zeitgeist and prices in Paris platforms, which suggests more than 50% of the economy confronted with consecutive quarterly contractions in the growth rate.
