Nouriel Roubini Believes Stock Market has Risen too Far, too Fast
Nouriel Roubini is still worried about the US economy, though he does believe we are coming to the end of the severe recession we have been in.
I believe, that if you were worried about your portfolio being overweighted in stocks late last year, now is a good time to move some money out of the stock market. In December 2008, when many were selling in panic, I invested more in stocks.
The stock market has been on a tear increasing
1 December 2008 the S&P 500 was at 816
1 January 2009 – 903
6 March 2009 – 684 (the lowest point since 1996)
1 May 2009 – 878
1 August 2009 – 987
5 October 2009 – 1040
In 6 months, since the market hit a low on March 6th, it is up 52%. Certainly the decrease in prices seemed overdone. The 50% increase in prices seems overdone also. But trying to predict short term moves in the stock market (say under 1 year) is very difficult and few people can do so successfully (even if you can find lots of people offering their guesses). Predicting the economy, while not easy, is much much easier that predicting the stock market.
If you are worried about how much of your portfolio is in stocks moving some our of stocks now makes some sense. It makes much more sense to sell now than it did 10 months ago, when many people were selling their stocks. I still would stay away from long term bonds and only hold a small amount in short term bonds: I would hold cash (money market funds, t-bills, CDs…) even though they pay next to nothing now. Personally I am not moving my money out of stocks but I am comfortable with my portfolio allocation.
Related: Stocks Still Overpriced? (December 2008) – Mobius Says Derivatives, Stimulus to Spark New Crisis – Add to Your 401(k) and IRA
Quotes by Nouriel Roubini from the interview:
I’m still quite bearish about the US economy, we are close to the end of this very severe recession, but I have been arguing for awhile this is going to be a very anemic, below trend, sub-par, recovery.
there is even a risk of a double dip recession, sometime next year.
the US and other countries should not exit from policy stimulus too soon, because the recovery is weak and there are still deflationary pressures… the problem is we are also facing fiscal pressures over the medium term… that requires, eventually, an increase in taxes and cut in government spending
in my opinion, markets have gone up too much, too soon, too fast, in part because there is this wall of liquidity chasing assets