(Bloomberg) — There’s a good chance that markets will see more turbulence ahead similar to what happened on Thursday and Friday, former Treasury Secretary Lawrence Summers wrote in a post on X Sunday.
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“This was the fourth largest two day move since the second World War,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. “The other three were the 1987 crash, the 2008 financial crisis, and the COVID pandemic. A drop of this magnitude signals that there’s likely to be trouble ahead, and people ought to just be very cautious,” he added.
US and international stock markets sank last week after President Donald Trump announced he was imposing hefty duties on China, the European Union and a raft of other countries, alongside a 10% levy on all US imports. The S&P 500 Index declined to its lowest level in 11 months, slashing $5.4 trillion in market value in just two sessions.
Summers warned of higher inflation, lower growth and lower consumer spending, calling an economic slowdown “almost inevitable” on ABC’s This Week.
“A reasonable estimate would probably be something like $30 trillion,” Summers said, referring to the potential hit from Trump’s tariffs. “The loss to the economy is like if all oil prices doubled,” he said. “People are right to want to hold cash. What we need is a reversal of these policies, and until we have a reversal, I think we’re going to have a problem.”
His comments run counter to the message from administration officials, including Treasury Secretary Scott Bessent who on Sunday struck a defiant tone, arguing the duties were necessary and rejecting the idea that they would cause a US recession.
On Sunday, main equity benchmarks in the Middle East, including Saudi Arabia, continued their rout, declining the most since 2020 as investors reacted to the risks of a fresh global trade war and depressed oil prices. Investors are also bracing for more turmoil ahead as Chinese markets in the mainland and Hong Kong reopen Monday after the country’s government announced retaliatory measures against all US imports.
A gauge of Chinese stocks listed in the US plunged 8.9% on Friday, the most since October 2022. A fall of similar magnitude in the local shares could put multiple Chinese equity gauges into a technical correction, and in some cases close to a bear market.
