Nobel Prize-winning economist Robert Shiller believes a recession could be several years away due to a hefty Trump effect in the market.
According to the Yale University professor, President Donald Trump is creating an environment conducive to strong consumer spending, and it is a great strength that should hold on to a recession.
"Consumers are hanging in there. You might be wondering why it would be so late in the cycle at this time. This is the longest expansion ever. Now you can say the extension was partially [President Barack] Obama," he told CNBC's "Trading Nation" on Friday. "But keeping up with this for a long time needs an explanation."
Shiller, a behavioral finance expert who is out with the new book "Narrative Economics," thinks Americans still open their wallets broadly based on what President Trump exemplifies: Consumption. [1[ads1]9659002] "I think [strong spending] has to do with the inspiration of many people from our motivational president who models luxurious lifestyles," Shiller said.
Shiller emphasizes that there is still uncertainty and risk around Wall Street.
Before the markets can take off, Shiller emphasizes President Trump needs to get past the lawsuit on inquiries. He sees this as the biggest threat to his optimistic forecast.
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"If he survives, he can help for some time in strengthening the market," Shiller said. "We may be in the Trump era, and I think Donald Trump's inspiration had an effect on the market – not just tax cuts."
Despite Shiller's optimistic stance, he does not warn that everything is rosy in the economy. His Shiller PE Ratio, also known as CAPE, tracks the price-to-earnings ratio based on average inflation-adjusted earnings over the past 10 years.
"I am not saying that I am so good because I have a CAPE ratio that is bearish," said Shiller, who predicted on "Trading Nation" in March last year. 50% chance that the economy will overturn a downturn in 18 months.
Still, he holds to the idea that the economy and markets should have a lot of runway for profits if President Trump stays in office because of his pro-spending, pro-business narrative.
Shiller claims that the next recession cannot hit for another three years, and that may be mild.
"Let's not make the mistake of assuming it is just around the corner," Shiller said. "If the economy is strong and that's what he built on the case, & # 39; makes America great again & # 39 ;, he has a good chance of being re-elected."