What's the worst-case scenario for stocks?

Economist Nouriel Roubini thinks 2013 will be a lousy year, even if the fiscal cliff gets taken care of. But things could actually get worse. Here's how.

By Charley Blaine Nov 16, 2012 4:41PM
© Munshi Ahmed/Bloomberg via Getty ImagesNew York University economist Nouriel Roubini earned the nickname "Dr. Doom" after he predicted much of the 2008 financial collapse.

He's hardly been optimistic since the financial crisis. He thinks 2013 will be trying for the global economy. Europe will be struggling with recession. China's economy is still soft, and he thinks U.S. economic growth will be modest at best.

But a perfect storm of four issues could make 2013 truly awful, Roubini said on an interview on Turkish television. Here they are:

The U.S. fiscal cliff issue doesn't get resolved. That means tax rates go up and government spending gets cut. The result, many economists believe, Roubini among them, will be another recession. We should note that President Obama and House and Senate leaders met Friday and swore they'd get the problem fixed. That was enough to turn a bad day for stocks into a winner.

The European recession gets nasty. This would occur if Greece runs out of cash (a real possibility) and leaves the euro currency in a messy way. Read that as this: Greece basically defaults on its debt and plunges global credit markets into chaos.

China's economy tanks. It's possible. Real estate in many Chinese markets has been overbuilt, and construction spending has slowed. The Shanghai Composite Index, the benchmark Chinese stock index, is down 34% since April 2011 and 67% since peaking in November 2007. Hong Kong's Hang Seng Index, however, suggests things aren't that bad. The index is up 15% this year.

War erupts in the Middle East. This assumes Israel and Iran somehow go to war, not a huge possibility by itself. But the rising tensions between Israel and Syria and Israel and Egypt over what Israeli forces might do in the Gaza Strip could cause major disruptions in crude oil markets, with crude oil pushing toward $200 a barrel with serious effects on the global economy.

So far, however, oil markets aren't in a panic mode.

Crude oil
(-CL) for January delivery in New York settled up $1.05 to $86.92 a barrel Friday and was up 1% on the week. Brent crude, the better indicator to watch in this case, was up 97 cents to $108.98 a barrel and is down slightly for the week.

Wholesale gasoline futures for December delivery ended the day up 1.39 cents to $2.7101 a gallon.

AAA's national average retail price of gasoline was $3.43 a gallon Friday, down slightly from Thursday and down 9.4% this quarter.

More from Top Stocks


Tags: oil
136Comments
Nov 16, 2012 8:53PM
avatar
vote for me and you dont have to work.  this is what the country has become, real sad, i feel real bad for us and especially for our children. its like a ponsy scheme sooner or later the money dries up
Nov 16, 2012 9:12PM
avatar
obamacare will be the final nail in the coffin for the US economy
Nov 16, 2012 9:31PM
avatar
You know I work for a very large global corp and he has it correct. Recently we have anounced temperary lay offs around the country and most likely more to come and maybe some permanent next year for already weak sales. We went thru this in 2008 as well with rolling lay offs. This feels like it could get alot worse for an extended time. I have a family to support and have been fortunate enough to be with this company for 15 years. I am very concerned now more than any time before about this country and our future. I was hoping for a change and it did not happen. I guess you just cannot change the outcome of the future. Oil prices (gasoline) is still high and is probably going to climb more with what is going to happen in the Mid East. You can try to blame the housing market for the prior recession but I believe it was the oil prices and gas tripling in price that started it. I am not a religious finatic, I don't go to church every Sunday, however I do believe in God and the Bible. The road we and the rest of the world are on is written in it. God bless us and especially our children for what lies ahead.
Nov 16, 2012 10:24PM
avatar

HE kept HIS job

 

Now

 

YOU are losing YOURS........

Nov 16, 2012 10:18PM
avatar
16 trillion deficit equals. . . . 48k per US citizen.  Isn't this correct?  Worked it in my head.  So, everyone in the US owes not only his own debt, but a nice new car as well.

America is finished.  We cannot tax or grow our way out of this disaster.
Nov 16, 2012 10:20PM
avatar

Are YOU kidding me?

WHAT IS WORSE THAN OBAMA IN THE WHAT HOUSE?

 

I will tell you what is worst:

it is all those who voted for this arrogant, inexperienced, liar and divider in chief....that's what.

IT IS SCARY when you CAN'T TELL SOMEONE WHO DON'T KNOW....AS....THE Democ.....RATS.

Nov 17, 2012 11:38AM
avatar
What I find interesting is that our great unbiased media hasn't made a big deal out of the worst week for stocks in a very long time. Look for more of the same hidden lies from them since they helped re-elect the worst president in Americas history.
Nov 16, 2012 11:19PM
avatar
The same leaders said real-estate was not a bubble in 2007 and the bad loans were contained. So I'm convinced they will avoid going over the fiscal cliff. NOT. 
Nov 17, 2012 10:26AM
avatar

Read the book "Atlas Shrugged" - it really sums this all up in one HUGE novel.

 

My life has now been determined by specific ethnic groups that voted based on color - and an age bracket that has net worth in negative figures and no jobs. 

 

Worse yet, no motivation to change it that actually required getting off the couch. 

 

Nov 17, 2012 2:49AM
avatar
What's the worst thing that could happen?  Hmmm...Well, America is waning as an international power...and the American people re-elected Obama and the Socialist Senators...so I don't see US diplomatic efforts being nearly as effective at preventing regional wars...
So yeah...the worst thing would be Russia and China making a play in the Middle East...and us being incapable politically and militarily of doing anything about it...

When Iran closes the Strait of Hormuz...well, that's going to be an interesting day to be sure...
Nov 16, 2012 11:09PM
avatar
Obama is giving stuff to his OCCUPIERS.........
Nov 16, 2012 8:00PM
avatar
It's OK, we have Obamanomics - that'll take care of everything.
Nov 17, 2012 11:43AM
avatar
The worst has just started, was reading about Obama's little army, graduated 230 in Sept, ran by Department of Homeland Security?  Supposed to help out in disasters, but the equipment they have is more like war stuff, age group 18-24.  Really young people.  Someone brought up what is the National Guard for then?  Good question.  In all my life, this is the first time I feel as if something really ugly is going to happen.  I pray that people wise up, quote I read "I fear the day that technology will surpass our human interaction.  The world will have a generation of idiots."  guess who?  Einstein.  God help us all.
Nov 17, 2012 10:58AM
avatar

It's already started....

 

Worst case senario, Obama re-elected, continues his war on business and the middle class, Ben continues his printing to infinity  and beyond.  For thoise democrats too stupid to do the math 40 billion is about $480/family/month.  He could just send each family a check, but instead he is letting Obama continue to reward his special interest groups...

 

Buy  guns/ammo, Specie (Au, Ag, Pl), and stocks, and stash some money overseas where Obama cannot get at it.   It would be wise to invest in diversified Foreign stocks.   Investing in Obama's America is like asking a Jew to invest in Hitler's Germany... 

Nov 17, 2012 11:38AM
avatar
Meanwhile, the rest of the world is falling apart.  Missiles are raining down in Jerusalem.  After assuring us otherwise, Iraq just set free a terrorist who killed 5 of our guys - he was allowed to hop the first flight to Beirut.  To make matters worse, Iraq is now urging other ME countries to use oil as a weapon against the US.  Our relations with Russia, Egypt and Saudi Arabia are at the worst they've been in decades.  New satellite photos show North Korea is setting up to test another missile.  The nuclear program in Iran has progressed further than ever before.  Pakistan continues to give us the finger and the Taliban are gaining more control in Afghanistan with each passing week.  Oh, and by the way, Al Qaeda is growing rapidly throughout North Africa and getting stronger by the day.    This is what happens when you put someone with no credentials in the White House.  From a foreign policy standpoint, Obama is probably the weakest, least experienced, most naive POTUS we've ever had, and it shows.  He consistently projects weakness and insecurity.  Instead of "the great unifier", Obama has turned into "the failed pacifier".  Mexican drug wars are being fought on our own streets.  When was the last time Obama addressed this with the Mexican President?  At this rate, the Nobel Prize committee should be calling the White House any day now, demanding Obama give back his award.

Nov 16, 2012 11:07PM
avatar
Dec 21, 2012 is the end of the world so whats everybody worried about?
Nov 17, 2012 8:19PM
avatar
reality 

increase of 14,000,000 on food stamps under OBAMA  to 47,000,000
I BELIEVE AT THIS RATE BY 2016 IT WILL BE  65,000,000  I M O

CHANGE WE CAN BELIEVE IN


Nov 17, 2012 10:37AM
avatar

"What's the worst-case scenario for stocks?"

 

I don’t believe for one second that anyone knows the answer to this question. I’m certain they won’t guarantee their opinion for a fixed price.

 

But, I do think we might all eventually find out the answer for ourselves the hard way. I guarantee it.

 

Nov 17, 2012 2:19AM
avatar
OBUMMER IS A DEEP DEEP INDERCOVER TERRIOST  HE WILL DESTROY AMERICA WE MUST STOP HIM
Nov 17, 2012 9:11PM
avatar

The worst case scenerio for stocks? They all fall to 0. It will not happen. There are cascading effects if the Fed limitlessly prints money to purchase its' own debt.

I do not see any reason to think that stocks will take off, but they won't drop to 0. I would start loading up on Medical stocks.

Maybe we could get the Feds to talk to Texas about how they can run their Government within its budget. They might learn a thing or two. But, D.C. can't find its own a** with both hands.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
284
284 rated 2
461
461 rated 3
671
671 rated 4
628
628 rated 5
618
618 rated 6
615
615 rated 7
495
495 rated 8
347
347 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
DYNDYNEGY Inc10
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.