“The Fed wants the market to crash”: 8 quotes from David Rosenberg
Veteran Wall Street economist David Rosenberg warned that the S&P 500 could fall another 27%, to around 2,700 points, meaning the worst for investors is yet to come. At the same time, it is still too early to talk about reaching the bottom of the market. He also criticized the Fed’s policy and gave a gloomy forecast for 2023, writes Business Insider.
Here are his 8 best quotes
“On my first day, when I set foot on the trading floor, chaos reigned. It was a frightening experience. I will never forget it.” (Rosenberg recalled his first day at the Bank of Nova Scotia on October 19, 1987, Black Monday, when the Dow lost nearly 22% in a single session.)
“They call me a permanent “bear”, which in some way is laid down almost at the genetic level.”
“We wanted to reformulate, and it turned out that, like a clown in a circus, they blew up a balloon. And now helium is coming out of this balloon – this is happening now with the real estate market. (Thus, Rosenberg criticized the Federal Reserve for inflating asset prices in recent years.)
“They [at the Fed] want the stock market to crash and house prices to fall. Why? Because at 100% they need to get to their “holy grail” – a consumer inflation rate of 2%, without asset deflation.” (Rosenberg is referring to the Fed’s attempts to bring inflation down from over 8% in September to around 2%).
During a bear market recession, 83.5% of the previous bull market reverses. That’s where we’re headed.” (Rosenberg estimates that the S&P 500, down 23% this year to about 3,700 points, could fall another 27%).
“You haven’t seen anything yet. All bad things are ahead of us because of delays. Next year we will get financial cramps. (He noted that the stock market has only just returned to its long-term average, and there has not yet been a recession in corporate earnings.)
“70% through the Fed’s easing cycle and 70% on the way to a recession is when the stock market usually bottoms. Today there is an inverted yield curve, but it will become even steeper next year. At that moment I will become a “bull”.
“I think total long-term bond yields are likely to exceed 20% next year, but the stock market is unlikely to rise 20% next year.” (According to Rosenberg, it was a big mistake not to buy long-term bonds just because of their recent weakness, since bonds will be the first asset class to recover from the current downturn).