Although we are eager and ready for financial recovery here at Via Meadia and prefer to spend our time looking for four leaf clovers rather than black cats, Nouriel Roubini, the Cassandra of global markets, has made his latest prophecy, and it doesn’t bode well for world outlook. In his most recent bearish note, Roubini discounts the recent global equities rally and the uptick in macroeconomic data coming out of the US. The news has been better than expected: blue-chip companies remain very profitable; China’s slowdown has been softer than feared; economies worldwide have received massive injections of liquidity; and the European Central Bank seems newly dedicated to doing whatever it takes to reduce stress on Europe’s banking system.But Roubini points out four major risks likely to deal blows to global growth this year: first, recession has spread from the periphery to infect the very core of the EU, with output contracting severely in Germany and France. Additionally, lack of competitiveness will continue to augment in Europe, with a major fall in the Euro’s value needed to to restore growth but unlikely to happen anytime soon. Second, the economic slowdown underway in China and greater Asia is unmistakable. Export growth is down in China and imports are shrinking. Singapore’s economy shrank for the second time in three quarters. Tawain has fallen into a technical recession. India is predicting 6.9% growth in 2012– its lowest rate since 2009. Third, American growth is peaking, under attack from all sides, with fiscal tightening set to escalate in 2012, elevated energy prices increasing the price of imports, and private consumption likely to remain subdued. Fourth, the Middle East is boiling, with American/Israeli-Iranian tensions mounting, Syria on the brink of civil war, and the Arab Spring’s legacy of drawn out instability persisting across the region.Our optimistic temperament wishes otherwise, but we are sensitive to this morbid pattern of sickly near-recoveries that consistently dissolve into new waves of panic. Amid so many things that could go wrong and have a negative impact on markets, the recent recovery is not quite healthy for us to relax. The global economy remains on the edge of a precipice.Here on the cliff’s edge, we continue to hunt for four leaf clovers, but can’t quite forget just how far we have to fall if something goes wrong.
Latest From Delphi: World Still on the Brink