Advertisement
Features

David Rosenberg: don't believe the Fed

The US Federal Reserve isn't expecting a recession. But the, it never does, says David Rosenberg of Gluskin Sheff. Even when one is just around the corner.

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

Jerome Powell, chairman of the Federal Reserve, cheered markets last week by telling them: "We're not forecasting or expecting a recession". But that's no surprise, says David Rosenberg of Gluskin Sheff "Not once in the past five decades has the Fed ever predicted a recession not even in the month before it happened". As Rosenberg points out, Powell's predecessors Ben Bernanke and Alan Greenspan (pictured below) each made similar claims ahead of the financial crisis in 2008 and the tech bubble bursting in 2001 respectively.

Advertisement - Article continues below

At the end of the day, the US central bank is hardly going to come out with a negative statement about the economy if it can avoid it. "These guys (and the gals) are the resident cheerleaders," after all. On top of that, Powell is planning to cut interest rates further to stave off any collapse, reckons Rosenberg, who expects rates to fall back towards 0% and for quantitative easing (or something similar) to restart. "I still say we're retesting the zero bound before the cycle ends, with even more rounds of unconventional measures."

It's not just the US that is overly complacent about recession. An apparently solid Canadian jobs-market report belied the fact that "the engine is actually spluttering", with key sectors, such as retail employment, looking weak. The Canadian dollar, which surged on the initial report, is likely to lose ground when the Canadian central bank is "compelled to follow the Fed and the other 31 central banks who have cut rates so far this year".

Advertisement
Advertisement

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Why Wall Street has got the US economy wrong again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
Abby Joseph: US markets have no margin for error
Investment gurus

Abby Joseph: US markets have no margin for error

Much of the markets' recent strength is down to the US Federal Reserve using monetary policy to backstop the equity market, says Abby Joseph Cohen, se…
31 Jul 2020
What will the US central bank do next?
US Economy

What will the US central bank do next?

As the US continues to grapple with the Covid pandemic, the Federal Reserve will meet to decide what to do next on jobs, inflation and the recovery in…
28 Jul 2020

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
Don’t despair on dividends – these companies could be set to bring them back
Income investing

Don’t despair on dividends – these companies could be set to bring them back

The value of dividends paid out by UK stocks has plummeted this year as companies “rebase” their payment policies. But things could soon start to look…
6 Aug 2020