Guru watch: US heads for recession

David Rosenberg of Gluskin Sheff was among the few to warn that America faced a nasty recession and a disappointing recovery from the credit bust. Now he reckons America is heading for another downturn.

"Post-bubble deleveragings are a multi-year adjustment process," he says. As the economy concentrates on paying down debt, growth is stunted and vulnerable to setbacks. Consumers, who account for around 70% of the economy, have just begun the long process of paying down their debt, which implies subdued spending. That has been going on for some time, but a new problem is that the fiscal stimulus has dwindled and looks set to be replaced with austerity.

Unemployment bottomed in March. Real disposable incomes, manufacturing output and the household survey of employment all peaked at the same time. "Something tells me we are very close to a recessionary outcome here." So the outlook for stocks, hitherto bolstered by strong profits, is darkening. "I don't think [equities] can stay divorced from the economy indefinitely."

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.