In short, 2013 is shaping up to be a very volatile year.
”As consumers, firms and investors become more cautious and risk-averse, the equity-market rally of the second half of 2012 has crested,” Roubini wrote in the column.
“And, given the seriousness of the downside risks to growth in advanced and emerging economies alike, the correction could be a bellwether of worse to come for the global economy and financial markets in 2013.”
Moody’s, meanwhile, stripped France of its triple-A credit rating, downgrading the country a notch to Aa1 from Aaa and left a negative outlook, meaning more downgrades are possible.
“France’s long-term economic growth outlook is negatively affected by multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labor, goods and service markets,” the ratings agency said in a release.
“France’s fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand, and in the longer term due to the structural rigidities noted above.”
The country is also less cushioned from external shocks than in the past, Moody’s added.
Morgan Stanley economists, meanwhile, have said the global economy faces a “full-blown recession next year,” with global gross domestic product due to contract 2 percent next year under a worst-case scenario if U.S. policymakers fail to prevent the economy from going over the fiscal cliff and if their European counterparts fail to fight the debt crisis across the Atlantic.
“More than ever, the economic outlook hinges upon the actions taken or not taken by governments and central banks,” Morgan Stanley said in a report, according to CNBC.
Investors, meanwhile, need to stay on their toes.
“Importantly, investors should keep an open mind and be prepared to switch between the scenarios as policy developments unfold,” Morgan Stanley economists concluded.