ISTANBUL (Bloomberg) - New York University professor Nouriel Roubini, who accurately predicted the financial crisis, said stock and commodity markets may drop in coming months as the gradual pace of the economic recovery disappoints investors.

"Markets have gone up too much, too soon, too fast," Mr. Roubini said in an interview in Istanbul on Saturday. "I see the risk of a correction, especially when the markets now realise that the recovery is not rapid and V-shaped, but more like U- shaped. That might be in the fourth quarter or the first quarter of next year."

Stocks have surged around the world in the past six months as evidence mounts that the economy is emerging from its deepest recession since the 1930s. The Standard & Poor's 500 Index has soared 51 percent from a 12-year low in March while Europe's Dow Jones Stoxx 600 is up 48 percent. The euphoria contrasts with the cautious tone of Group of Seven policy makers, who said after their meeting in Istanbul yesterday that prospects for growth "remain fragile".

"The real economy is barely recovering while markets are going this way," Mr. Roubini said. If growth doesn't rebound rapidly, "eventually markets are going to flatten out and correct to valuations that are justified. I see a growing gap between what markets are doing and the weaker real economic activities."

The International Monetary Fund predicts the global economy will expand 3.1 percent in 2010, led by growth in Asia, after a 1.1 percent contraction this year. That is still "anemic" and "very weak", Mr. Roubini said.

US stocks fell last week after manufacturing expanded less than anticipated and unemployment climbed to a 26-year high, fueling concern the economy is rebounding more slowly than forecast.

Gains in the S&P 500 have pushed valuations in the index to more than 19 times reported operating profits from the past year, data compiled by Bloomberg show. That is near the most expensive level since 2004.

The performance of the US economy is probably more sluggish than reflected in stock markets, risking a correction in equities, Nobel Prize-winning economist Michael Spence said last month. US stock-market investors have "over processed" the stabilisation of growth in the world's largest economy, Mr. Spence said.

The global equity rally has added about $20.1 trillion to the value of stocks worldwide since this year's low on March 9. Governments have poured about $2 trillion of stimulus into the global economy while central banks have cut interest rates to close to zero in efforts to revive growth.

"In the short run we need monetary and fiscal stimulus to avoid another tipping point and to avoid deflation, but now this easy money has already started to create asset bubbles in equities, commodities, credit and emerging markets," Mr. Roubini said. "For the sake of achieving growth stability again and avoiding deflation, we may be planting the seeds of the next cycle of financial instability."