Brace yourselves because Dr. Doom is back!! Despite all my past write-ups that bring up movies, I promise I’m not talking about Victor von Doom of the Fantastic Four. I am referring to Nouriel Roubini1, the economist that foresaw and predicted the subprime mortgage crisis, thereby earning the most foreboding, dark title of “Dr. Doom.” That has to be pretty cool on a business card, right? Dr. Doom – Roubini – once sat on the Council of Economic Advisors during the Clinton Administration, has degrees from everywhere, and as the son of Iranian Jewish parents, brings a unique perspective to economics.
Roubini’s work – it’s collectively ominous and unabashedly negative on the future. He is the author of “Crisis Economics: A Crash Course in the Future of Finance” and “MegaThreats: Ten Dangerous Trends That Imperil our Future and How to Survive Them”. The latter book addresses the “Mother-of-All” debt crises as total debt goes over 350% global GDP as well as “Demographic Time-Bombs” addressing aging workforces and strained pensions. He discussed a “Long Stretch of Stagflation” as a big risk as well as the “AI- and Automation-Driven Job Disruption.” You need to be armed with a glass of wine in hand and a flippant Friday-night attitude if you’re going to sit down on the recliner for an evening Roubini read. Dr. Doom has more than fairly earned his appellation as he is more often than not is correct with his prognostications, unlike Columbia, SC native economist Harry Dent2, who makes a living predicting doom and gloom. Dent wrote such ill-timed books like “The Great Crash Ahead” in 2011. (And that wasn’t the only one). If you listened to Harry in 2011, you would have missed the greatest bull run of all time.
Why bring up such a Negative Nancy in Nouriel Roubini? Well Dr. Doom is going to have to file for a name change to Dr. Delightful if he keeps talking like he did during a recent appearance on Bloomberg Television3. According to him, The U.S. is in a ‘Productivity Revolution’. Come again? I reread my screen. His quote plastered on the screen was “The U.S. remains at the center of a technology-driven positive supply shock that raises growth and lowers inflation.” The host said he was bullish through 2030 and he agreed. Say what? That sounds downright positive …
Roubini goes on during his Bloomberg sit-down to talk about the Atlanta Fed’s massive GDP forecast of 5.4%, and productivity numbers as high as 5% when they were at 1% through 2019. He said he was a bit skeptical of the number but “it’s definitely accelerating”. He admits that wage growth and job numbers are languishing but argues that strong GDP numbers and weak labor growth equals “a productivity revolution.” He points out the 15% growth since 2022 of the S&P 500 of 5% per year to 20% growth of productivity numbers since 2022 of technology. He also says that the weak wage growth equals more profitability for corporations. The host asks him about the increasing risks of militarization, and he downplays it citing the lack of a drop in markets during the 12-day Israel-Iran war of 2025 and very little market effect from America’s Venezuela incursion.
This “positivity shock” from Roubini comes off as anachronistic as it blasts across a very tense economic background. Valuations are undeniably high collectively and company values in many cases are stretched. The S&P 500 Shiller CAPE Ratio is a great way to assess the overall valuation level of US Large Cap stocks. Here’s the chart below:
The market is at its 2nd-highest all-time level if you group the readings by relative time period. January of 2000 marks the highest reading at 43.77. The days and months surrounding that were at a higher level than now (and we know what happened after), but other than this one spike in 2000, we’re presently living in the highest valuation in S&P 500 history. That’s a mouthful. Our friend, Dr. Doom would not be viewed as a crazy outlier right now in this highly valued stock market. If he had trotted out to the TV set and said “a crash is imminent” or “sell now, not later,” the Bloomberg hosts would have probably said it was very timely. But he didn’t do that. He was remarkably positive and optimistic going forward.
So what do we do with his prediction? I think it’s possible these ideas aren’t mutually exclusive. We CAN have a world with high market valuation and the resulting trepidation and feelings of leeriness of an impending drop while also still believing in a growth thesis. What goes up can go higher. In fact, that’s true 70% of the time if you look at the last 100 years of the market. There have been lots of recent highs in just the last 15 years. Look at this graph of S&P 500 performance since 2010:
Please follow the orange line of S&P 500 since 2010 and count for me all the all-time highs you see. Go ahead. I’ll wait. Granted, I’m showing you a historic bull run that was interrupted on several occasions with short bear markets but you get the idea. The history of the stock market is made up of all-time highs and all but a handful of them are lower than the market today. The market historically marches onward.
That being said, as fiduciaries we maintain a cautious outlook due to the overall valuation and the concentration of much of that growth in technology. To say that market performance as of late is tech-driven would be to make the understatement of the year. Generally, right now, it’s going to be prudent in many cases to take some risk off the table with 10% of your assets. Your advisor will dive into whether that’s right for you and your situation. But Roubini is sounding an unexpected trumpet, and for once it’s not one of the 7 frightening Doomsday Trumpets of divine judgments on the Earth from the Book of Revelation. Roubini’s no longer preaching doom. He’s preaching growth. We believe it IS possible to represent both ideas in managing your portfolios and your risk, subject, as always, to your time horizon, financial goals and risk tolerance.
So many things are happening in the world so fast it’s hard to track. We can tell you that as an Investment Committee, we’re really happy with the Extended ETF Portfolio we examined in detail yesterday. You can think of it as thematic investing if you will but we’re tracking the news trends and lining up ETFs we think will match those. Last year we got into an Aerospace & Defense ETF for instance and added technology exposure. Both moves look to be correct in hindsight and we’re looking forward to showing you the results at our State of the Markets class at Top Golf on February 5th. If you have not signed up, please do so here. (hyperlink of registration link on the word here).
We think this trend of technology and defense will continue as we see Trump looking to tamper by offering money to Greenlanders and put Greenland in the Transfer Portal. He did so in a White House tweet that the US will put “More money in YOUR pocket. Just a reminder.” with a picture of Trump hefting a sack of money over his head with the headline “No Tax on Tips”. It turns out the White House has a writer as cheeky as me. We also note from Open Source intel at least one carrier strike group on its way to Iran. Xi Jianping’s not getting any younger as he turns 73 this year, so if he were a US citizen with an IRA he’d have his first RMD on the way soon. He still has Taiwan on his mind.
As portfolio managers we’re looking to help you take advantage of the prevailing trends in the world and turn those into more dollars in your portfolio. As advisors we’re looking to make sure you’re properly allocated according to the risk you want to take in the market. For some of you, what I’ve said here about valuation will trump Dr. Doom’s very pleasant forecast. For others of you, Dr. Doom’s words will be encouragement to lean into your investing. Call and let us know if you are on Team Doom or Team Delight (and waffling in the middle is fine, too). If you listen to us, we’ll change your financial world …
Sincerely,
Scott Wright
Portfolio Manager
The Wealth Training Academy
(Marketing Disclaimer: Past performance is never a guarantee of future results. We offer a lot of services. Our planning, tax, and insurance strategies are designed to improve financial outcomes when implemented as recommended. We’re confident in these strategies, but results will vary based on individual circumstances. Investment results cannot be guaranteed. Unless otherwise indicated, no third party individuals mentioned in this article are clients of our firm, nor have they been compensated for appearing. This article is for educational purposes only. For personal advice about your situation please call our office. ~The Compliance Department.)
Sources:
3Nouriel Roubini Sees a Tech-Led US ‘Productivity Revolution’
