David Rosenberg: don't get too comfortable

Investors seem to be getting over their fear of a recession, investment guru David Rosenberg has said. But that could be a mistake.

943-Rosenberg-634

David Rosenberg Chief economist & strategist, Gluskin Sheff

Investors seem to be getting over their recent fear of recession, citing ongoing strength in the US labour market as a key reason to be cheerful. That's a mistake, argues David Rosenberg, the frequently bearish chief economist at Canadian wealth manager Gluskin Sheff. "Everyone continues to say I don't see a recession'," he says. But "like carbon monoxide, that odourless gas, it creeps up on you without your realising it".

He notes that employment is typically a lagging indicator (ie, it doesn't start to fall until the point at which the economy is already in trouble).So using jobs statistics as any guide to the future "is a waste of time because they are not... forecasting tools".

There are many other signs that a recession is coming. Inflation is weakening, even though commodity prices have roared ahead in the year to date "this is the fastest start ever for the resource complex even hotter than 1973 when the oil embargo began", notes Rosenberg. And yet "inflation expectations continue to melt... this is not the hallmark of a fast-growing economy".

Investors still believe that Fed chief Jerome Powell will step in to loosen monetary policy if things deteriorate. The trouble is that monetary policy also acts with a lag the Fed would need to be looking at cutting now, which does not seem to be on the cards, to prevent a slump. Remember, says Rosenberg, "that ten of the last 13 Fed hiking cycles have ended in recession". So don't bet on a Fed bail out coming in time.

Recommended

Iris Apfel: an inspiration to young fashionistas
People

Iris Apfel: an inspiration to young fashionistas

Iris Apfel made her name as a high-society interior designer before a show at the New York Met turned her into a fashion influencer. At 100 years old,…
19 Sep 2021
Klarna’s Sebastian Siemiatkowski: fintech innovator gunning for the banks
People

Klarna’s Sebastian Siemiatkowski: fintech innovator gunning for the banks

Sebastian Siemiatkowski’s Klarna app allows customers to buy now, pay later, without racking up interest charges. He’s excited about the future. Regul…
12 Sep 2021
Pedro Castillo: leftist outsider who rode to power in Peru
People

Pedro Castillo: leftist outsider who rode to power in Peru

Pedro Castillo amassed support among the left-behind as a trade-union leader before riding to power in this year’s presidential race. What has the cou…
7 Sep 2021
The MoneyWeek Podcast: Sebastian Lyon on the benefits of being boring
Investment strategy

The MoneyWeek Podcast: Sebastian Lyon on the benefits of being boring

Merryn talks to Sebastian Lyon, founder and CEO of Troy Asset Management and manager of Personal Assets Trust, on his “boring” approach to asset manag…
3 Sep 2021

Most Popular

Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021