Dr Doom Roubini sees market correction in 2nd half of 2013

Dr Doom says the U.S. fiscal drag will eventually catch up with the stock market.

In a CNBC interview on Friday, economist Nouriel Roubini, who is known for his pessimistic outlooks,

hence earning his nickname (Remember, he called the global financial crisis back in 2006), says investors should prepare for disappointment later this year.

Speaking at an international economic conference, the Ambrosetti Forum, held on the shores of Lake Como, Italy (poor guy),

Roubini warned that higher taxes and spending cuts will knock U.S. economic growth this year.

“Payroll taxes, taxes for the rich, are going to significantly reduce disposable income, and retail sales have been a disaster,” Roubini said.

Well he must be pretty concerned, because he said something similar to Bloomberg last week.

He also gave an interview to Bloomberg News on Friday in which he predicted a bigger economic bubble coming in 2013 than 2004.

“And there are already signals of consumption growth slowing down, as well as the sequester,

and the fiscal drag this year will be 1.5% of [gross domestic product] for an economy that was barely growing last year,” he told CNBC.

At best, the U.S. economy will grow 1.5% in 2013, Roubini predicted.

And ever the party pooper, he said markets could ultimately get a shock from the scale of the slowdown in the U.S. economy later in the year.

The Dow Jones Industrial Average notched another record high Thursday.

“I think that the market is going to be surpised by how much the U.S. is going to slow down, even compared to last year,” Roubini said.

TWEET 6:44 AM - 08 Mar 13 Nouriel Roubini  @Nouriel

The weather is cloudy & gloomy at the Ambrosetti Forum on the Lake of Como. Just like the Italian political climate

As a result, his baseline estimates for earnings and revenue growth point to disappointment in the second half of the year.

“The U.S. stock market could correct somehow,” said Roubini.

He made similar comments to Bloomberg News.

He said there was a bigger economic bubble coming in 2013 than 2004.

Similar comments were heard on Friday from a Nordea Bank senior strategist.

Henrik Drusebjerg told MarketWatch that financial markets seem a bit detached from what’s going on politically:

“In a  low-growth environment, ignoring that this [sequester effects] is in front of us,

I’m a bit surprised to see both sentiment indicators and real data being as positive as it is,

and also seeing financial markets keep on climbing as if there were no tomorrow.

What I fear is in the coming months weeks we will get some of a reality check on numbers because sequester will showing effects.”

It could also be (though not likely) that the weather was getting Roubini down — 50 degrees and chilly down on Lake Como right now.