Nouriel Roubini, the famed economist who's earned the nickname "Dr. Doom" for his prescient predictions of the global financial crisis, has a new warning: a Donald Trump return to the White House raises the risk of a stagflationary shock.
"The combination of trade, currency, monetary, fiscal, immigration and foreign policy of Trump poses much higher risks of stagflationary outcomes than if Kamala Harris is elected," Roubini said from the sidelines of the Greenwich Economic Forum in Connecticut on Wednesday. In his view, Trump's policy plans — including imposing higher tariffs, devaluing the U.S. dollar, and taking a tough stance on illegal immigration — threaten to slow down the economy and simultaneously spur inflation higher.
Roubini also points to tensions in the Middle East as a potential catalyst. Further escalations could lead to a spike in oil prices, thus raising price pressures, he said.
Brent crude traded above $81 a barrel last week as tensions between Israel and Iran reheated. Oil has since retreated to hover closer to $75 a barrel amid supply concerns. Higher oil prices hurt businesses and consumers.
Domestically, Trump's hard-line immigration tactics, such as vowing to force mass deportations, pose another risk given the economic boost migrants provide, Roubini said.
To hedge against these risks, Roubini recommends investors hold gold, short-term duration bonds and Treasury inflation-protected securities, or TIPS.
