Tags: roubini | stock | decline

Roubini: Stocks Could Fall Another 30 Percent

By    |   Tuesday, 28 Oct 2008 02:41 PM

Economic guru Nouriel Roubini says stock markets around the world have a lot further to fall and that the S&P 500 index could plunge another 30 percent or more.

“We’re entering a severe two-year recession that hasn’t been fully priced into financial markets,” Roubini told Bloomberg News. “There is significant downside risk in U.S. and global equities.”

The S&P index already has dropped 43 percent from its record high close on Oct. 9, 2007. That makes this, so far, the fourth-worst bear market in U.S. history.

The global economy is entering a period of stag-deflation, Roubini says.

“The U.S., other advanced economies and even emerging markets will have recessions at the same time,” he says.

“Slack demand for goods and labor and sharply falling commodity prices imply inflation going toward zero and then negative,” he says.

Conditions in economies and financial markets are “scary” now, Roubini says.

“There is lousy macroeconomic news, financial news and earnings news. You’ve got deleveraging, liquidation, capitulation. Markets are becoming dysfunctional and unhinged.”

Roubini says recession could last more than two years without government intervention.

“We need more monetary easing, especially in Europe, and massive fiscal stimulus,” he says.

“Traditional Keynesian policy can make a difference.”

Federal Reserve Chairman Ben Bernanke agrees, at least in terms of a stimulus. The Fed is meeting today and Wednesday and is widely expected to cut the federal funds rate to 1 percent, down from 1.5 percent now.

“With some risk of a protracted slowdown, consideration of a fiscal package by Congress at this juncture seems appropriate,” he told Congress last week.

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Economic guru Nouriel Roubini says stock markets around the world have a lot further to fall and that the S&P 500 index could plunge another 30 percent or more.“We’re entering a severe two-year recession that hasn’t been fully priced into financial markets,” Roubini told...
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Tuesday, 28 Oct 2008 02:41 PM
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