Nouriel Roubini, CEO of Roubini Macro Associates LLC, was hosted by Naji Nehme, CFA, Chief Investment Officer at Petiole Asset Management AG, to discuss market uncertainty, rising inflation and the looming recession. Below are highlights of the discussion:
- We live in unexpected, unusual and unprecedented times of uncertainty. 2022 has been the year of threats within the economic, monetary and financial ecosystems, and we’ve witnessed geopolitical, environmental, health, supply chain and technological threats among others.
- An important question this year was whether the rise in inflation worldwide was transitory or permanent. Central banks first predicted it was transitory, but inflation then reached double digits and turned out to be permanent.
- Bad policies related to monetary, fiscal and credit easing, especially during the Covid-19 crisis, resulted in excessive inflation. There was also bad luck with a series of supply shocks that reduced economic growth and increased production costs. The three most important shock factors relate to the impact of:
- Covid-19 on the production of goods and services, labor and global supply chains,
- The invasion of Ukraine by Russia on the prices of energy, food, fertilizers and industrial metals, and
- The continuous zero Covid policy in China on local production and the global supply chain.
- Central banks hoped to reduce inflation to 2% without causing a recession. This looks nearly impossible now. The UK had double-digit inflation and is already entering a recession. The European Central Bank is likely to reduce growth expectations this week. We're not yet in a recession, but economic activity has slowed sharply.
- Gold can be a great hedge against financial crises and political and geopolitical risks. Real estate performs better than equities amid moderate and rising inflation, provided that monetary policy is not much tighter. Technology firms are expected to revolutionize biotech, health care, and longevity among others, especially with sophisticated artificial intelligence and machine learning. They should outperform others over time.
- No one becomes richer overnight by investing in stocks, crypto or other speculative investments. To achieve long-term wealth, one must study and work hard, save a meaningful fraction of their income, and invest in a diversified portfolio of assets with different risk levels.
Watch the full webinar above.
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