Summary

Roubini is famous for predicting the financial crisis of 2008-09. With typical prescience they forecast a recession in 2020 citing a fragile system vulnerable to shock. They discussed the pandemic, policy response and economic impact and made the point that markets are able to price in risk but not uncertainty. Until tracing, testing and full suppression (currently the US is practising mitigation) markets will not bottom. Their base case, the “greater recession”, is for equities to fall around 40%, finishing the year down 20% as some economic improvement is visible in Q3 and Q4 from the massive policy response. The risk of something worse, the “greater depression”, is driven by the pandemic not being contained – a second phase as the virus mutates, running out of policy bullets – monetising fiscal deficits leads to stagflation. And Geopolitical depression – exacerbates the process of deglobalisation.

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