The economy won’t live up to the stock market’s V-shaped dreams, and when that becomes apparent, watch out, says Nouriel Roubini.
Bloomberg: “Markets have gone up too much, too soon, too fast,” Roubini said in an interview in Istanbul on Oct. 3. “I see the risk of a correction, especially when the markets now realise that the recovery is not rapid and V-shaped, but more like U- shaped. That might be in the fourth quarter or the first quarter of next year.”
“The real economy is barely recovering while markets are going this way,” Roubini said. If growth doesn’t rebound rapidly, “eventually markets are going to flatten out and correct to valuations that are justified. I see a growing gap between what markets are doing and the weaker real economic activities.”
Though the rally hasn’t done Roubini’s buzz any favours, he could very well be right here.
Last week the market got whacked amid a growing sense that the data wasn’t coming in nearly as robust as people would like. The weak jobs report was just one piece, but there were several other indicators of a creaking recovery, and one that would be particularly fragile without pull-it-forward policies like Cash-For-Clunkers.