- The S&P 500 could drop another 27% to around 2,700 points, David Rosenberg warned.
- He ruled out a short-term market bottom and said “Black Monday” made him an eternal bear.
- The veteran economist criticized the Federal Reserve, touted bonds and issued a gloomy outlook for 2023.
David Rosenberg warned the S&P 500 could drop another 27%, forecast long-term bonds to rise more than 20% next year and ruled out a bottoming in the stock market anytime soon.
The veteran economist and head of research at Rosenberg reflected on his experience as a Wall Street economist on Black Monday, which happened almost exactly 35 years ago, during a RealVision interview published this week. He also accused the Federal Reserve of inflating asset prices and issued a gloomy outlook for 2023.
Here are the 8 best Rosenberg quotes, lightly edited for length and clarity:
1. “The first day I walked into a floor, there were people hanging from chandeliers. It was chaos. And it was a terrifying experience. I’ll never forget it.” (Rosenberg’s first day as an economist at the Bank of Nova Scotia was October 19, 1987, called Black Monday, when the Dow lost nearly 22% in a single session.)
2. “If that happened to you, then you’d be Eeyore the donkey for the rest of your professional life too. They call me the permabear. It’s almost genetic in a way.”
3. “They wanted to inflate again. They’re like a clown in the circus, they inflated the balloon. And now the balloon is, I’m not saying it’s bursting, but helium is surely coming out of the real estate market now.” (Rosenberg criticized the Federal Reserve for inflating asset prices in recent years.)
4. “They want the stock market to go down. They want home prices to go down. Why? Because there’s not a snowball chance in hell that they’re going to get their holy grail of consumer inflation.” 2%, without there being a period now of asset deflation. It’s 100% necessary.” (Rosenberg was referring to the Fed trying to bring inflation down from over 8% in September to around 2%).
5. “In a recessionary bear market, 83.5% of the previous bull market condition reverses. You’re looking at something like 2700 in the S&P. That’s where we’re headed.” (Rosenberg’s estimate suggests the benchmark stock index, down 23% this year to about 3,700 points, could drop another 27%.)
6. “You haven’t seen anything yet. All the bad is yet to come because of the delays. Next year will be the year that we have financial spasms. Next year will be the year that the Fed… as always does, he’ll yell ‘uncle’ and say we’re done. (He noted that the stock market has only returned to its long-term average so far, and there hasn’t been an earnings downturn yet.)
7. “70% of the way into the Fed easing cycle and 70% of the way into the recession is when the stock market typically bottoms. Today they are adjusting into an inverted yield curve, but there will be easing.” and Steeping the curve next year. I intend at that time to become a permabull.”
8. “I think the long-term bond total yield is likely to exceed 20% next year. I don’t think the stock market will hit 20% next year.” (Rosenberg said it was a “big mistake” not to buy long-term bonds because of their recent weakness, as he expects bonds to be the first asset class to recover from the current recession.)