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:HERE'S MY #7: THERE IS NO REASON TO BELIEVE THAT THE US ECONOMY OR THE GLOBAL ECONOMY WILL START GROWING.
- 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.).
IF OIL WERE TO DROP TO $45/BARREL AND IF THE US CONGRESS COULD COME TO A REALISTIC COMPROMISE THAT DEALS WITH LONG-TERM DEBT, THEN WE MIGHT BE ABLE TO EKE OUT SOME GROWTH.
I EXPECT NEITHER.