Bear Market Will Continue: Roubini

By: Reuters | 08 Apr 2009 | 03:22 AM ET
There's still bad news ahead for the US economy — and by extension for Canada — and the bear market for stocks is not over yet, according to a prominent economist who foretold much of the current turmoil.
Nouriel Roubini, a professor at New York University's Stern School of Business and chairman of economic research firm RGE Monitor, said on Tuesday that he expected more dour macroeconomic data and problems in the banking and housing sectors, as well as pressures on consumers.Big stimulus packages will eventually slow the rate at which economies contract, but that will take time, he added.Roubini, who made a name for himself by sounding early warning signs about housing bubbles and credit crises, earlier told Canada's BNN television that he still believed the recent market upturn represented a bear market rally, and not a change in sentiment.

"Macro news, earnings news and financial shocks are going to be worse than expected and that's why I believe this is still a bear market rally," he told BNN.

Markets logged four straight weeks of gains until this week on optimism that unprecedented interest rate cuts and billions of dollars of stimulus will eventually fight off the worst global downturn since World War Two, and on upbeat comments from U.S. banks on their performance so far in 2009.The fact that some indicators did not match pessimistic expectations was also a positive factor, as were last week's pledges by world leaders to do more to fight the crisis.But Roubini played down the rally.
"I am more a realist than a pessimist. I'll be the first one to call for the bottom of this economic contraction, recovery of the market when I see a sustained economic and therefore financial recovery," he said.

Meredith Whitney, chief executive of Meredith Whitney Advisory Group, said stabilization in the banking sector would hold the key to a turnaround.Whitney, one of Wall Street's most bearish bank analysts, has forecast another rough year for banks as they shed assets to raise capital.