Tags: shiller | market | recession | turmoil

Yale's Shiller Fears Market Turmoil Will Spark Recession

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By    |   Thursday, 20 December 2018 03:12 PM

Nobel winning economist Robert Shiller fears that the recent stock-market volatility and economic-slowdown signs will eventually push the nation into a recession.

“I am worried about these markets and about a recession,” the Yale University economics professor told CNBC.

“The turmoil in the market, it’s more the theory that we’re hearing that some correction is overdue, than any specific action of the Fed,” said Shiller, the co-founder of the Case-Shiller Index, which tracks home prices around the nation.  

“We’ve had a very highly priced stock market and housing market and bond market,” said Shiller, who was awarded the Nobel Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013.

“There a lot of indicators showing softening” in housing, he said. “It is worrisome.”

Shiller didn’t find any fault in the Federal Reserve’s decision Wednesday to increase interest rates for the fourth time in 2018 and project two hikes next year.

Shiller called the central-bank strategy “reasonable on the basics.” Shiller also praised Fed Chairman Jerome Powell as “levelheaded,” saying the central bank is being “very reasonable” and it’s “not out of bounds at all.”

Shiller isn't alone in his apprehension about the market and economy.

Treasury Secretary Steven Mnuchin said Thursday that the negative market reaction following the Federal Reserve's rate hike this week was "completely overblown."

Mnuchin said the market overreacted, with computerized program trading taking over and driving stock prices down further, the Associated Press reported.

In a Fox Business interview, Mnuchin said that he believed markets were disappointed in Powell's comments at a news conference following the meeting.

The Fed boosted its key policy rate for a fourth time this year but lowered its projections for further rate hikes from three to just two. However, this failed to calm investors' concerns that the central bank is not taking into account warning signs that the economy is slowing.

"I think the market reaction is completely overblown," Mnuchin said, noting that the U.S. economy is still projected to out-perform other countries next year.

While the Fed trimmed its forecast for growth as measured by gross domestic product to 2.3 percent next year after an expected 3 percent GDP gain this year, Mnuchin said the administration still believes it can achieve 3 percent annual growth next year as well.

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Nobel winning economist Robert Shiller fears that the recent stock-market volatility and economic-slowdown signs will eventually push the nation into a recession.
shiller, market, recession, turmoil
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2018-12-20
Thursday, 20 December 2018 03:12 PM
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