Tags: stock | prices | drop | plunge

Nomura’s Janjuah: Stocks to Plunge 10% on Dismal US Growth

Wednesday, 11 Apr 2012 08:16 AM

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Stocks will fall at least 10 percent in the second quarter and may continue to plunge the rest of the year, says Bob Janjuah, co-head of global macro research and head of tactical asset allocation at Nomura Securities.

Blame cooling earnings, a more sluggish U.S. economy and the European debt crisis for the upcoming selloff.

Yields have been rising in Spanish government bond auctions on concerns the country is running into financing problems.

Editor's Note: Obama’s Last-Ditch Effort to ‘Fix’ America Will Cause the Unthinkable

The European Union, European Central Bank and the International Monetary Fund recently arranged a $172 billion bailout for Greece, which has calmed markets in recent weeks.

Experts, however, insist rescue funds provide stopgap relief for indebted countries but don't tackle fundamental problems of not enough growth and too much debt.

Even if Europe does avoid collapse, growth will return to a sluggish clip at best.

"Now that we have moved on from the systemic crisis in the eurozone, it is now becoming clear to an increasing number of people that we have merely swapped a dramatic V-shaped collapse-followed-by recovery for a long-drawn-out period of weak growth," Janjuah writes in a note, according to CNBC.

The U.S. economy will grow only 1.5 percent in 2012 instead of 2.5 percent that many predict.

Warm winter weather has pumped up economic indicators but fundamentally, little supports more robust growth in the world's largest economy.

"The U.S. consumer is in a weak and vulnerable position. Savings have been run down, to worryingly low levels, house prices are still falling, but the jobs picture is already turning down and gasoline prices are up nearly 20 percent from the December lows – and rising," Janjuah writes.

Earnings have been a bright spot in the U.S. in recent quarters thanks to cost-cutting and tapping business opportunities in emerging markets.

But that won't last with Europe, the U.S. and even China cooling off, other experts say.

"Whatever qualifications you want to give it — it's because of cost-cutting, they've laid off a lot of people — earnings have been one bright spot," says Adrian Day, president of Adrian Day Asset Management in Annapolis, Md., according to the Associated Press.

"If that were to turn, that would be sort of the last leg on the stool being knocked away."

Editor's Note: Obama’s Last-Ditch Effort to ‘Fix’ America Will Cause the Unthinkable



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