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
Nov 17, 2012 3:28PM
Nov 17, 2012 3:20PM

" LOOSER" ?     uneducated  OBAMAZOMBIE     LOL 

LOSER   !!!  the spell check tab is next to the CANCEL TAB and is there just for YOU !!!
Nov 17, 2012 1:44PM
I see that there are a bunch of sore looser republicans posting here.
Nov 17, 2012 1:40PM
It's obvous that to all that Robioni always sees the glass to be half empty! How can a war between two ****ries that don't have oil reserves cause oil markets to panic?
Nov 17, 2012 1:16PM

Last year the federal government received 6.7 trillion from tax revenue. It still needed to borrow 1 trillion. That accounts for 17% more then revenue received. As long as congress allows this administration to continue no budget and borrowing policy ;the market, dollar and economy will be doomed. We all can agree that spending 17% more every year then is taken in is unsustainable. The interest alone will bankrupt us. You can ignore the problem and believe the government will take care of you forever, but there is a date on the wall where the money train will run out of fuel. Whether you agree with me or not at this point, all Americans will feel the pinch and see why fiscal discipline should have been implemented. This will also be a very interesting day in America. The world will see if The Social Contract that America has with its government is still strong or will there be anarchy like we see in Grease.

Nov 17, 2012 1:16PM

Pretty sure I put an opinion on here about Roubini...Looks like it's gone...?


Guess you have to be careful what you say about somepeople's heroes.?


Anyone could guess what he is guessing, right now..Doesn't take a rocket scientist.

Nov 17, 2012 11:58AM
At the very LEAST we should recogize economists like Roubini and Faber when making decisions for our retirement monies.Not taking the bullish recommendations only from  people trying to sell us equities that they make their profits from or a government trying to change sentiment of the market.
Nov 17, 2012 11:43AM
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 11:38AM
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 17, 2012 11:38AM
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 17, 2012 11:21AM
If you would stop worring so much you would figure out that **** happens and is never the end of the world!! Wall street is the villian in most of the worlds problem. They lost more money than if the fisical cliff would happen. Who's the stupid??? I didnt vote for Obama either but its over so get use to it !!!! We have had a lot of idiots running things lately!!!
Nov 17, 2012 10:58AM

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 10:37AM

"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 10:26AM

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 8:41AM

We talk about Roubini on other blogs. The ones that don't have mindless Southerners clogging the top positions with foolishness and dribble. Anyone get the feeling that Mylanta is a big seller in the South because it also looks like it says: Atlanta, on the label? Kids... if you want to feel better about things... turn Limbaugh off and get a life.


His bolded points are spot-on. No one believes a fiscal resolution will occur without force. Europe is toast. It hasn't had economy in years. Greece would do better if it walked away. Didn't China take on GOP characteristics? How on Earth can it recover when a very small segment of the population got all the earnings and toys? IF we had Romney, we would be neck and neck toward that Train Wreck! War in the Middle East is inevitable. Israel wants it. This time, let's send our older GOP in first and keep our kids back here to help restore what older GOP ruined.

Nov 17, 2012 2:49AM
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 17, 2012 2:36AM
The GOP is pondering why they lost when they did all the right things, tried to block equal pay for Woman, Blocked all recovery bills, fought to teach children that the earth is only 6,000 years old and a rape victim can only get pregnant if she wants to, claimed global warming is a hoax and told the 47% POOREST AMERICANS THAT THEY ARE STUPID LEECHES ON SOCIETY and if you are in college and want contraception coverage, you are a whore. Maybe it's time to swing  a little back toward the center, Ya Think.
Nov 17, 2012 2:19AM
Nov 17, 2012 1:38AM
What a bunch of whiny crybaby losers
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.
100 character limit
Are you sure you want to delete this comment?


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.


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.

124 rated 1
266 rated 2
452 rated 3
702 rated 4
671 rated 5
604 rated 6
640 rated 7
495 rated 8
267 rated 9
158 rated 10

Top Picks




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.