Economist Nouriel Roubini now predicts that U.S.-based multinational companies and the bond market will triumph in spite of weak economic growth and the Federal Reserve's plans to trim its bond purchases, according to a wide-ranging speech he delivered last Monday.
Mr. Roubini, who foresaw the global financial crisis and is sometimes known as Dr. Doom for his downbeat predictions, told a professional investors' conference that inflation pressures remain weak and that the Fed's decision to taper its asset purchases will not destabilize bond markets.
The Fed's surprise decision this month to adhere to its five-year policy of buying $85 billion in bonds per month drove markets higher.
“It's clear that the Fed has realized that the economy was weak,” Mr. Roubini said.
He said Fed vice chairman Janet Yellen, a front-runner to take Ben S. Bernanke's position as chairman when his term expires in January, would be unlikely to push monetary policy in a new direction.
“She might be a notch more dovish than other members of the board, but under Bernanke, the Fed became a collegial democracy,” Mr. Roubini said after his speech at IndexUniverse LLC's Inside Commodities conference in New York. “It will be a consensus-driven Fed.”
Mr. Roubini delivered an assessment of a global economy still struggling to rebound from the effects of the economic crisis, saying growth prospects in the U.S. and Europe remain weak. He also predicted a slowdown in China and other emerging markets.
U.S. economic growth could lag at or below 2% this year, according to Mr. Roubini.
But he said that the prospects for large-cap companies with global exposure are relatively strong, while bonds and emerging markets will be weak when the Fed tapers. But bonds will survive the tapering process, in part because the economy at that point will be stronger, Mr. Roubini said.