- David Rosenberg expects U.S. equities to underperform in 2021 as they rise too high.
- The veteran economist warned that the end of fiscal stimulus will ruin economic growth.
- Rosenberg said the Federal Reserve cannot prevent the next market correction.
- See more stories on Insider’s company page.
David Rosenberg sounded the alarm on US equities, predicting an economic downturn next year and warned that the Federal Reserve will not be able to stop the next market downturn in a recent interview with RealVision.
The chief economist and strategist at Rosenberg Research & Associates also urged the Fed to raise asset prices, trumpeted Japanese equities, and argued that the Evergrande failure could dampen global growth.
Here are Rosenberg’s top 10 quotes from the interview, easily edited and condensed for the sake of clarity:
1. “At this point in the stock market, you are chasing nickels in front of the steamroller. We have reaped all these returns that are not much left.”
“The US stock market is trading at multiples that we have only seen a second time in the last century. And that was in 1999 to 2000 during the dot-com bubble.”
“If I were a long-only stock investor and I had to be fully invested in stocks, I would not be in the S&P 500 right now. I would be in Japan, their valuations are just a lot more compelling. The earnings stream that you pay for in Japan is so much more compelling than in the US stock market right now. “
“It’s going to be a challenging year for stocks. Not everything is going to go down, but if you’re a passive investor, you’re probably better off just being in cash than being in stock market indices.”
5. “We are in enormous uncertainty in so many different respects – financial, political, economic.”
6. “I shudder to think about what the next recession is going to bring. Global debt is $ 300 trillion, that’s 350% of GDP. Be careful what you want as interest rates go into the next interest rate cycle. , because it will probably be enough to tip the balance against a recession – maybe not next year, but probably the year after. “
7. “Your tightening did nothing for the job market, your quantitative easing just increased risk appetite and animal spirits and had nothing to do with the job market. Why don’t you come out and just say, ‘We do QE because we think we’re in an asset bubble and we’re trying to disinfect it? ‘”- criticizes the Federal Reserve.
“We must have the mother of all fiscal pullbacks next year. That equates to almost 3 percentage points of GDP. Fiscal pressures next year will equate to 250 basis points for Fed rate hikes.”
9. “The Fed will not be able to control the market that much. They come with guns in flames, but they do not prevent the correction. But they will be there to pick up the pieces.”
10. “The Evergrande situation is really symbolic of what happened to China’s debt and property bubble. It may well be contained in China from an economic point of view, as they own pretty much all the bonds. But China is almost 20% of that. global GDP, so it will definitely have a global economic impact. “