NYU economist Nouriel Roubini says there is more pain ahead. He thinks the stock market is headed toward the “mother of all asset bubbles, ” according to Business Insider. It won’t burst immediately. Roubini thinks we are at the mid-point of the bubble bursting, but he sees the euphoria that has characterized the bull run in stocks as dangerous.
Given the fact that most of the world is going through an economic slowdown, the rally in stocks seems unjustified. Roubini thinks the asset “frothiness” should continue for a couple of years, then the bubble will grow, pop and there is going to be a crash. The equity markets, in his words, are “stretched, and they’re going to become more stretched as the real economy justifies the slow exit, and all of this liquidity is going to go into more asset inflation … so two years down the line, we are going to have this shakeout…2016, I would say.”
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Roubini advises not investing heavily in equities, particularly in risky high growth areas like biotech and social media.
