David Rosenberg: this is a “Potemkin market”

You need only look at the global bond market to see that we are in unprecedented territory, says David Rosenberg of Gluskin Sheff.

David Rosenberg, chief economist and strategist for Gluskin Sheff © Misha Friedman/Bloomberg via Getty Images

David Rosenberg, chief economist and strategist for Gluskin Sheff © Misha Friedman/Bloomberg via Getty Images

This is a "Potemkin market", says David Rosenberg of Gluskin Sheff it might look normal on the surface, but dig deeper and it's anything but. Even "after ten years of free money" from central banks, "we are stuck in a deflationary debt trap", the oft-bearish analyst argues. This unpromising, disinflationary backdrop has helped to prop up equities, but only because low interest rates have enabled companies "to buy back their stock in droves and mask a downturn in corporate profits".

You need only look at the global bond market to see that we are in unprecedented territory. Around "$15trn [£12.4trn] of global investment grade bonds" now trades with a negative coupon (in other words, investors holding until maturity are guaranteed to lose money, in nominal terms at least). Meanwhile, "safe haven" assets such as gold, the Japanese yen and the Swiss franc are doing well indeed, the yellow metal has outperformed the S&P 500 so far this year while "risk-on" assets such as oil and iron ore have been hit by the "weakening global demand outlook".

Another sign that investors should be cautious? Warren Buffett has been pulling money out of stocks this year. During the three months to the end of June, the US investor's investment vehicle, Berkshire Hathaway, sold $1bn more worth of stocks than it bought, according to Bloomberg. So "someone out there with deep pockets recognises that the fundamentals' are not so great after all", notes Rosenberg.

Recommended

Which assets will benefit as the “jam tomorrow” bubble pops?
Investment strategy

Which assets will benefit as the “jam tomorrow” bubble pops?

With tech stocks, cryptocurrencies and many other “long duration” investments crashing hard, the “jam tomorrow” bubble looks to be bursting. John Step…
24 Jan 2022
The charts that matter: the start of the big crash?
Global Economy

The charts that matter: the start of the big crash?

US tech stocks fell further this week, more than 10% down on their November high. There’s what happened to the charts that matter most to the global e…
22 Jan 2022
The charts that matter: markets start the year with a crash
Global Economy

The charts that matter: markets start the year with a crash

As markets start 2022 with a big selloff, here’s what happened to the charts that matter most to the global economy.
8 Jan 2022
The charts that matter: Fed becomes more hawkish
Economy

The charts that matter: Fed becomes more hawkish

Gold rose meanwhile the US dollar fell after a key Fed meeting. Here’s what else happened to the charts that matter most to the global economy.
18 Dec 2021

Most Popular

Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022
Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Interest rates might rise faster than expected – what does that mean for your money?
Global Economy

Interest rates might rise faster than expected – what does that mean for your money?

The idea that the US Federal Reserve could raise interest rates much earlier than anticipated has upset the markets. John Stepek explains why, and wha…
6 Jan 2022