Photo: AP images
The stock market has been falling hard since the election, though it’s really been weak since the beginning of October.The popular explanation of the fall is the “Fiscal Cliff”, which is a somewhat disappointing and unsatisfying explanation, since it’s not like there’s been any new information on that front (and in fact, if anything, the early tone has been fairly conciliatory).
In a note to clients of his firm last week, Nouriel Roubini gave 6 reasons why the rally has been “running out of steam.”
We summarize them in bullets:
- Growth is weak.
- The Eurozone crisis is backsliding again. Greece is coming to a head (once again).
- Political concerns (fiscal cliff, etc.).
- Valuations have gotten way stretched, and are difficult to justify given low inflation and more developed market deleveraging.
- QE is running out of its impact, and unlike past QEs (QE1 and QE2), QE3 was launched near a market peak, and if anything revenue and earnings misses are expected to accelerate.
- Geopolitical risk is back (Israel, Gaza, Syria, etc.).
None of these are terribly new for investors, but they do point to a collage of concerns that expand just beyond The Cliff.
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