--- title: "Markets Declare Victory, Former IMF Chief Economist: Judgment 'Too Naive'!" type: "News" locale: "en" url: "https://longbridge.com/en/news/282907217.md" description: "Harvard professor and former IMF Chief Economist Rogoff warns that the market's assessment of the war situation is 'too naive'; meanwhile, he believes the US dollar is overvalued by at least 20%, and historical patterns suggest such overvaluation typically corrects within five to six years. The war has driven safe haven flows into the dollar, creating an inherent contradiction with the risk of a mid-term dollar correction" datetime: "2026-04-15T20:31:14.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/282907217.md) - [en](https://longbridge.com/en/news/282907217.md) - [zh-HK](https://longbridge.com/zh-HK/news/282907217.md) --- # Markets Declare Victory, Former IMF Chief Economist: Judgment 'Too Naive'! The long-term risk of US dollar overvaluation and the uncertainty surrounding the Middle East conflict are presenting a dual test for markets. According to Bloomberg, Kenneth Rogoff, former Chief Economist of the IMF and Harvard professor, stated that the US dollar is currently overvalued by at least 20%. Historical experience shows that such overvaluation typically corrects within five to six years. At the same time, he warned investors not to be overly optimistic about the trajectory of a potential war with Iran. This judgment has direct implications for the market. Since the outbreak of the Middle East conflict, investors have viewed the US dollar as a Safe Haven amid geopolitical tensions and rising oil prices, leading to a massive inflow of funds. If the conflict continues and the dollar faces correction pressure, the current safe-haven logic will be challenged. According to a previous Wallstreetcn article, Goldman Sachs' Dominic Wilson holds a similar view. He believes the market has not ignored the war but is no longer betting on the worst-case scenario, yet the pricing for extreme risks remains too low. Meanwhile, interest rate market pricing has become 'too hawkish,' while the logic for a bearish US dollar in the medium term remains unchanged. ## **US Dollar Overvaluation Risk: Five-to-Six-Year Correction Pattern** Rogoff stated, "The dollar may still be overvalued by at least 20%." Citing historical experience, he noted, "In every previous similar case, whether for the US dollar or other major currencies, once such overvaluation occurs, it typically corrects within approximately five to six years." The scholar, who formerly served as Chief Economist at the International Monetary Fund (IMF), characterized the current dollar overvaluation as a structural risk rather than a short-term fluctuation. The Bloomberg Dollar Spot Index reached an all-time high in September 2022, when the Federal Reserve raised rates at a rare rapid pace to curb inflation. Since then, the index has fallen more than 10% from its peak, but in Rogoff's view, the adjustment is not yet complete. ## **Middle East Situation: 'Quick Victory' Assessment Too Naive** On the geopolitical front, Rogoff questioned the market's optimism. He argued that the notion that the war with Iran is "mission accomplished" is naive, implying that the market underestimates the possibility of the conflict continuing or escalating. The resumption of hostilities in the Middle East has reignited concerns about the sustainability of energy-driven inflation shocks. If oil prices remain high, inflationary pressures will be difficult to dissipate quickly, limiting the Fed's room to ease monetary policy and thereby having a profound impact on the pricing of risk assets such as stocks and bonds. ## **Safe Haven Logic Faces Dual Pressure** In summary, Rogoff's warning points to an inherent contradiction: the safe-haven demand driving the dollar's strength exacerbates its overvaluation; meanwhile, the potential continuation of the war makes this overvalued state even harder to digest naturally in the short term. For investors, this means that current safe-haven trades implicitly carry the risk of a currency correction in the medium term—even if geopolitical logic continues to support dollar demand in the short run. ### Related Stocks - [USDU.US](https://longbridge.com/en/quote/USDU.US.md) - [UGL.US](https://longbridge.com/en/quote/UGL.US.md) - [SGOL.US](https://longbridge.com/en/quote/SGOL.US.md) - [IAU.US](https://longbridge.com/en/quote/IAU.US.md) - [UUP.US](https://longbridge.com/en/quote/UUP.US.md) - [GLDM.US](https://longbridge.com/en/quote/GLDM.US.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) ## Related News & Research - [LIVE MARKETS-Energy rally fueled by Iran war, but Wells Fargo says time to rotate](https://longbridge.com/en/news/282724280.md) - [U.S. economy sags, as Iran war is a major source of uncertainty, Fed's 'beige book' says](https://longbridge.com/en/news/282887714.md) - [Bessent disparages IMF, World Bank forecasts, says US will quickly cycle through higher prices](https://longbridge.com/en/news/282733409.md) - [IMF’s Georgieva warns war fallout will linger as global growth outlook dims](https://longbridge.com/en/news/282452974.md) - [IMF chief warns that Iran war will slow global economic growth](https://longbridge.com/en/news/282222719.md)