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The Santa stock market rally could end abruptly with a “bad January,” David Rosenberg said.
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The economy could collapse in 2024 as past fiscal excesses and interest rate hikes pose obstacles, he said.
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The chairman of Rosenberg Research released his latest gloomy outlook in a research note this week.
Stocks appear overextended after their Santa Claus Gathering and are expected to decline in January – and the US economy is much weaker than it appears and on the verge of collapse next year, David Rosenberg warned.
The President of Rosenberg Research anticipated the Great Recessionbut financial markets and the economy have defied its dire predictions during the last years. Merrill Lynch’s former North American chief economist offered his latest gloomy outlook in a research note on Thursday.
Here are the top 5 quotes, lightly edited for length and clarity:
1. “The stock market appears increasingly overbought, even to the most casual observer. The major averages, especially the Nasdaq, have become very extended from their 50-day trendlines. Sentiment indicators are reaching extremes in terms of uptrend. Valuations remain stretched and are not convincing when compared to the risk-free interest rate. And earnings estimates are no longer rising – in fact, they have started to reverse ever so slightly.
2. “We will most likely have a Santa hangover at the start of the new year.” Certainly, investors waiting to sell stocks until January for tax reasons are delaying this potential pullback, but ultimately it could end up being a bad outcome. January. »
3. “The economy is much more fragile than it seems.” (Rosenberg pointed to a recent survey indicating business conditions are deteriorating and noted that the last 10 economic indicators released last month, including nonfarm payrolls, housing starts and consumer spending, all showed declines. downward revisions.)
4. “The fastest rate hike cycle since the 1980s is starting to take effect — just as pundits and markets are buying into the talk of a ‘soft landing.’ Households are feeling the effects of the most aggressive tightening cycle since the 1980s, as credit card and auto loan woes reach levels we last saw during the 2008 global financial crisis. Unpaid debts on these loans are expected to rise further as layoffs increase and banks tighten their lending conditions.
5. “We have experienced a “soft landing” all year, as was the case in 1979, 1989, 2000 and 2007. The “soft landing” is the transition phase – the bridge – between the phase expansion of the business cycle and into the contraction phase, which I think will be the story of next year. The Fed is locked in a recession. (Rosenberg predicted that aggressive fiscal stimulus in 2023 would reduce year-over-year growth and highlighted the late impacts of the most extreme rate-hike cycle in four decades.)
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