At the Inside ETFs conference in Florida last month, Yale professor and Nobel laureate Robert Shiller talked about an impending recession, the threat of nuclear war and the importance of human narratives. This according to an article in Advisor Perspectives.

Here are some highlights:

  • Shiller characterized a recession as “inevitable” but didn’t pinpoint timing. “There has to be an elevated probability of a recession this year or next year,” he said, noting that the current expansion has been the longest since 1837.
  • Regarding market valuations, Shiller said he didn’t want to “make too much of” the currently elevated cyclically-adjusted-price-earnings ratio (CAPE). “It’s going to come down a little bit,” he said, due to weak earnings data from 10 years ago that soon will no longer be included in the denominator.
  • The threat of nuclear war, although extremely small, is top-of-mind for Shiller. The devastating consequences, he said, make it foreboding.
  • Shiller talked about the importance of human narratives in economics, how our “stories” drive the economy more so than numbers. Narratives, he argued, are a fundamental component of business choices.

“As long as the market keeps going up, everything will be fine,” Shiller said. “But if it starts going down in a serious way, things will be different.”

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