Nouriel Roubini, famously known as “Dr. Doom” for his ultra-bearish views, sees a global recession next year if the trade war escalates. Roubini predicted the 2007 housing bubble crash. In an interview with Bloomberg TV, Roubini said, “The consequences of this trade and tech war and cold war [are] the beginning of de-globalization … and the decoupling of the global economy. We’ll have to redo the global tech supply chain. And eventually by next year, if this escalates, it will be a global recession.” Roubini said that the worsening US-China trade war was his base case scenario. He said, “It has already been in the data — the collapse of CAPEX. And once the CAPEX is down, then the industrial production is down and the employment is down, and you have the beginning of a global recession that starts in tech, then in manufacturing, then in industry and then goes to services.”
Should you bother?
Recently, economic data has shown signs of cooling off. We aren’t talking about one or two data points. The economic data has been soft across the board with a few exceptions. The trend is visible pretty much globally in emerging and developed economies. Central banks have taken the baton in their hands and look open to rate cuts. Read Is the US Federal Reserve behind the Curve on Rate Cuts? to learn more. However, given the already low interest rates, central banks don’t have adequate ammunition. On the fiscal front, most government balance sheets are already stretched. The US isn’t an exception.
Roubini isn’t alone in seeing a recession on the horizon. UBS also sees a recession. When we saw a yield curve inversion in the first half of 2019, many economists jumped on the recession bandwagon. Earlier in 2019, Goldman Sachs put a high probability on a recession. Goldman Sachs even saw markets moving in a rangebound direction in 2019. However, the S&P 500 (SPY) made a fresh high on July 1. The S&P 500 had the best first half since 1997. Apple (AAPL) and Amazon (AMZN) have outperformed the markets in 2019. Apple and Amazon are part of Berkshire Hathaway’s portfolio.