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Nouriel Roubini Predicted S&P 600 on March 9th, 2009

October 14, 2009 | About:

This might have been one of the worst calls ever!

Roubini Says S&P 500 May Drop to 600 as Profits Fall

By Jeff Kearns - Bloomberg

March 9, 2009 (Bloomberg) -- The Standard & Poors 500 Index is likely to drop to 600 or lower this year as the global recession intensifies, said Nouriel Roubini, the New York University professor who predicted the financial crisis.

The benchmark index for U.S. stocks would have to slump 12 percent from last weeks closing level to meet his forecast. Roubini is assuming that companies in the S&P 500 will report profit of $50 a share this year and investors will pay 12 times that for equities.

My main scenario is that its highly likely it goes to 600 or below, Roubini said today in an interview at the Chicago Board Options Exchange Risk Management Conference in Dana Point, California. A level of 500 is less likely, but there is some possibility you get there.

The S&P 500 has dropped 25 percent to 676.53 in 2009, its worst start to a year, following a 38 percent decline in 2008 that was the steepest annual retreat since 1937. In response to the U.S. recession that began in December 2007, the Federal Reserve cut its benchmark lending rate to as low as zero and President Barack Obama got congressional approval for a $787 billion economic stimulus plan.

Even if you do everything right with fiscal and monetary policy, were still going to be in a recession through the end of this year and into next year, Roubini said earlier during his speech at the options-industry conference. The recession train left the station over a year ago, and its going to continue.

Severe Risks

Stocks still face severe risks and may extend declines amid plunging corporate earnings, an accelerating contraction of the global economy and a dimming outlook for banks, he said. The global economy is likely to shrink for the first time since World War II and trade will decline by the most in 80 years, the World Bank said yesterday.

This onslaught of worse-than-expected macro news is going to have a negative effect on stock markets, he said in his speech. In the next few months many people are going to realize that many financial institutions are insolvent.

Merrill Lynch & Co.s chief North American Economist David Rosenberg said today the S&P 500 may bottom out at 600 in October, lowering his estimate after the benchmarks decline last week. That level is about 20 percent below Novembers level of 752.44, which was then widely viewed as the fundamental low, Rosenberg said.

Roubini, known as Dr. Doom because of his predictions of global financial collapse, also said there was some positive news because the Group of Seven industrialized nations has pledged not to let major banks fail.

Last fall, we were one accident from a financial meltdown, he said. That risk of a total sudden meltdown has been reduced by the actions of the G7. They said were not going to let any major institute collapse.

Rating: 3.6/5 (9 votes)


Kfh227 - 10 years ago    Report SPAM
roubini will be another example of someone you don't remember 20 years later.
Mrhiv - 10 years ago    Report SPAM
You can't have a biased opinion, Roubini only predicts falling prices.

To beat the market you need to play in both sides, like Soros
GCastle - 10 years ago    Report SPAM
I wonder if this post isn't a contrary indicator. Remember, Roubini still has two-and-a-half months to be right.
Expectingrain - 10 years ago    Report SPAM
Check the date-- very close to the low of the market. I think Roubini's 15 minutes are pretty much up.
Commodity - 10 years ago    Report SPAM
Who can predict the future.

With 20/20 hindsight everybody is a stock genius.

Come next bull market the public will right back at it.

They are.

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