A few months ago,  the perennial doomsayer Professor Nouriel Roubini was at it again in a newspaper headline entitled “Five steps to global catastrophe”.

As we have now become accustomed, Professor Roubini – who teaches at New York University’s Stern School of Business – tends to see the current economic and market situation through his prism of a perennially dark fog of gloom and uncertainty.

Roubini seems to be basking in the glow of being accredited by some for predicting the GFC. My view is that his predictions were actually made after the first signs of trouble with the sub-prime crisis emerged in August 2007 and problems with Bear Sterns in early 2008.

Moreover, the fact is that while the GFC has caused world economies to slow from their previous rapid pace, the world has not fallen off the proverbial cliff and we have not experienced an apocalypse, as the exaggerated comments attributed to Nouriel Roubini would indicate.

Clearly the world is not about to suddenly take off in boom territory. But what one can reasonably anticipate is that the world economies and markets will experience what I would call a “two steps forward, one step back” movement, over the next five to six years. Still, that’s a whole lot better than going backwards as Roubini would seem to suggest.

Global economic growth is stabilising and, except for mainly the Mediterranean countries, showing mainly positive. Growth may be low, but it’s growth nevertheless. Inflation is low and unemployment still well below historical highs.

Debunking Roubini

Roubini claims that there are four external forces that will impede US growth this year (which he described as proceeding at stall speed) as follows:

1. A worsening in the eurozone crisis;
2. An increasingly hard landing for China;
3. A general slowdown in emerging market economies; and
4. Structural problems, including the risk of higher oil prices as negotiations and sanctions fail to convince Iran to abandon its nuclear program.

Each of the above mentioned factors can be challenged.

That’s not stalling

Firstly, the US economy is still growing as opposed to what Roubini calls “stalling”. If their economy was stalling, this seems to imply that it is not growing at all and possibly even going backwards. The facts are that the US economy has been growing at around 2%-3.5% over the past year or so, while this year, economic growth is below 2%. The fact is however, that the world biggest economy is still growing, albeit at a slow pace.

Secondly, Roubini predicts a hard landing for China. If growing your economy at around 7%-8% represents a hard landing, then perhaps one should re-write the Oxford Economic Dictionary about what the meaning of “hard” actually is. For goodness sake, let’s get real – even if China’s growth rate was halved it would still be more than twice the US and almost three times that of Germany. If you’re growing (or flying, to use aeronautical terms) you’re not landing, be it in a hard or soft way.

An exaggerated train wreck

Roubini describes the European situation as a “slow moving train wreck”. What Roubini fails to understand again, is that the European continent has been through two disastrous World Wars in the last century. The genesis of the euro, European Union, the European Common Market and, before that, the Treaty of Rome was the European countries’ earnest desire not to endure another World War. Accordingly, the EU and various other European organisations will do whatever it takes to ensure the ongoing sustainability of the Union and the European single currency.

We have seen since 2012 efforts by Europe to shore-up the problem states of Greece, Italy, Ireland and Portugal. It is my view that the overriding goal of the EU will ensure that Europe gets through, even if it may be muddling though, but a “train wreck” certainly it is not. The US got through the sub-prime and Global Financial Crisis period and so to can Europe.

Emerging markets

Next, Roubini says there is a slowing in emerging and developing countries. Slowing maybe, but still growing! Growth rates in countries such as Malaysia, Philippines, Indonesia and the South American countries of Chile, Mexico, Columbia  and even Venezuela  continue to grow strongly (close to 5% average),  albeit at a touch slower pace than previously has been the case.

Iran and oil

Finally, Professor Roubini’s comments about Iran and oil are in the realms of the hypothetical. In my view, Iran is not going to be so stupid as to incur the wrath of the rest of the world by going down the nuclear weapons path and ignite retaliation by the world’s super powers. Accordingly, in my view there is not going to be any major disruption to major oil supplies because of Iranian foolhardiness. But then again, even if this there is such a situation, one only has to remember that in 2009 oil prices in fact reached almost $150 a barrel – currently oil prices are only half that. Indeed, in the 1970’s oil prices quadruped overnight on two separate occasions – and we still survived.

My outlook for the markets in 2013

So in the light of the above, where do I see the market moving in 2013?

In brief, and in contrast to Professor Roubini, I think we’re in for a very, very good year. There are four main reasons:

• First, the European situation will be well on the way to what I call “neutralisation” by 2013;
• Second, the US will not fall off even the metaphorical “cliff”, and could see economic growth at around 3%;
• Third,  we see another 0.5% cut in interest rates; and
• Fourth the market always anticipates the future.

I believe our market could stride out by around 20% over the 12 months to finish next year at between 5,500 – 5,600 on the ASX 200 index. Indeed, once the election is out of the way there should be a real fuel injection in the last quarter of the year

Not just dividends

Of the stocks to benefit from the environment in the blue-chip arena, I would continue to be a supporter of Telstra (TLS) and the Commonwealth Bank (CBA). Some say that the main thing going for these stocks is their dividend yield; I disagree. I believe that there is lots of growth in Telstra through its multi-faceted operation through pay television, through mobile phones and through the internet and on top of that you have the cash flowing in from the NBN. CBA is in my view the premier Australian bank and with an improvement likely in the residential housing sector, this should be very positive for banks like Westpac and the CBA, which are heavily biased towards the residential sector.

There are many mid-capitalisation stocks on my preferred list, but I will mention just two now. The first is Flight Centre (FLT). It has sound fundamentals and with more people travelling on cheap flights, this is likely to be major benefit to Flight Centre. Also, it should benefit from an improvement in American and European economies where Flight Centre now has operations.

The second is Arb Corporation (ARP), which has been a great performer over the years and should benefit through Australians’ strong penchant for four-wheel drive accessory vehicles.

Overall, 2013 in my view is likely to be a lot better than the previous four years.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should consider the appropriateness of the information in regards to their circumstances.