by Vivek Pejaver, MBA ’23
Professors Roberto Rigobon and Andrew Lo have provided their invaluable perspective on the future of the economy:
The Lowdown with Professors Lo and Rigobon: Making sense of Financial Markets, the Global Economy and Career Strategies in Turbulent Times
Below are a few salient points they addressed:
Currently, the economy will likely enter the recession and last longer than it should because the policies between the federal reserve and congress are in contradiction. Congress doesn’t want to curb spending while the central bank wants to curb inflation by reducing consumers ability to spend. Given the opposing views between the congress and the federal reserve, this will create ‘unnecessary costs for the economy.” Other countries are trying to keep interest rates low such as China or Japan. However, since the US is increasing rates, these countries will likely see in outflow of capital to economies such as US where rates are more favorable. Likely these countries’ monetary policies will not help control global inflation. Ultimately, Professor Rigobon mentions that countries are not used to experiencing such high inflation since we’ve been in such a stable environment. Governments are still trying to understand the best course of action on how to respond.
During times of uncertainty there is a lot of opportunity and innovation, Professor Rigobon remarks. He mentions three pieces of advice to consider during these uncertain times:
- Be flexible in your knowledge. Take courses in new subject areas and invest in areas that would help broaden your knowledge.
- Be flexibility in your mindset. Be thoughtful in your decision making and understand what information or evidence you need to think that course of action might be wrong. This will provide valuable perspective when making career decisions, for example.
- Be inflexible in your life objectives and values. Set very ambitious objectives and pursue objectives that are very important to you. This will help you pursue innovation and challenge the status quo.
Professor Lo commented on the current economic environment centering around two themes: the Russian invasion of Ukraine and inflation. Inflation in particular has been caused by supply chain constraints, seen in areas such as semiconductor and car manufacturing. Professor Lo expects us to enter a recession for the next 6-12 months but the economy should recover quickly since the fundamentals of the economy are quite strong, indicators such as consumer demands are quite strong.
Although we will likely be in a recession, Professor Lo points to a period in US history in the early 1900s, in which we experienced a similar pandemic. Although it was a difficult time, it was a period of immense innovation and growth, a term Professor Lo points to as “adaptive radiation.” In particular, sectors such as electric vehicles, autonomous vehicles, consulting, healthcare, and technology should see immense growth in the next 5 – 10 years. He remarks, similar to Professor Rigobon, to be flexible as the job market has adapted to new areas of growth and ways of working.
