Stop the presses—legendary pessimist Nouriel Roubini is sounding optimistic. Is this the eighth sign of the apocalypse (or maybe the top of the market)?
The noted New York University economist and founder of Roubini Global Economics told CNBC on Tuesday that the “easy money” policy of the Federal Reserve will continue for “as far as the eye can see” and that’s going to continue to be good for the U.S. stock market.
“When you look at the [mixed] economic data, there’s a gap between the fact that the markets, rightly so, are buoyant,” he told the network, “because middle of last year central banks had done another massive round of quantitative easing.”
“Some of the improvement in the markets is not because growth is picking up … certainly easy money implies asset inflation,” Roubini added.
Don’t take the prediction lightly. CNBC notes Roubini earned the moniker of “Dr. Doom” for the 2008 fiscal crisis and its bleak aftermath. Tempering his outlook somewhat, Roubini said he also sees positives and negatives coming for the American economy.
“There are some positives in the U.S. this year. You have QE, you have housing, you have the shale gas, you have some recovery in jobs in manufacturing,” he explained in the interview. “But between the [January] fiscal deal … and probably ‘the sequester,’ or something similar, we might have a $300 billion fiscal drag this year.”
He predicted that broad government spending cuts in the form of sequestration could “technically put the U.S. in a double-dip recession with near-zero growth in the first quarter,” following the surprise announcement last week of negative growth in the fourth quarter of 2012.
But for this year, he sees economic growth in the 1.6% to 1.7% range with continued high unemployment.
“[The unemployment rate] is not going to fall to 6.5%, which is the trigger for the Fed stopping zero policy rates,” Roubini said.