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.
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".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Private school fees soar and VAT threat looms – what does it mean for you?
Rising private school fees could see more than one in five parents pull their children out of their current school. Before you remortgage, move house or look to grandparents for help, here’s what you need to know.
By Katie Williams Published
-
Best and worst UK banks for online banking revealed
When it comes to keeping your money safe, not all banks are equal. We reveal the best and worst banks for online banking when it comes to protecting your money from scams
By Oojal Dhanjal Published