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.
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
- Nonunionized Wal-Mart still facing strikes
- Sears shares plunge after depressing earnings report
- Major shift in consumer sentiment looms
GOD BLESS OUR COUNTRY AND OUR PRESIDENT. A new centrist movement is forming within the GOP and a budget that is right for our country will be accomplished before the fiscal cliff. I have confidence in our President to make this happen so we can quickly accomplish the remainder of what he was originally elected to do. Obamacare will be a blessing for those who can't afford insurance. Illegal aliens should not take precedence over Americans for health care. We also need to immediately seize upon the brightest minds in the world to rebuild our aging energy grid and prepare for a huge influx of amazing all-electric and plug-in hybrid vehicles. What a wonderful future to look forward to with zero dependence on foreign oil. The Israelis did not want to give Gaza over to the Palestinians as land-for-peace because they knew the day would come when that land would be used against them to launch an assault. That day has arrived. If we can't remove the thugs and gangs who occupy Gaza then we should carpet-bomb the whole damned place since we were the ones who forced Israel to do the deal. When we are gone and their oil and gas is no longer needed, the Arabs will find out real quick the price of immorality. Then again, could this all be a result of conspiracy between BIG OIL and the Jews to make Obama rethink our new policy on being energy independent? Such is the power of BIG OIL that they can force even GM to build gas-guzzlers at a time when the owners cannot afford to gas up their cars. Enough is enough. Throw the Tea Party out and let's build on the dream. Energy independence in 10 years!!!!!!
BARACK HUSSEIN OBAMA HAS BEEN RE-ELECTED.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. 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 SIX Financial Information.
In the never-ending contest for sales, American carmakers are pulling ahead.
VIDEO ON MSN MONEY
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.