The S&P 500 could fall another 27% to around 2,700 points, David Rosenberg warned. He ruled out a short-term market bottom, saying “Black Monday” made him a perpetual pessimist. The veteran economist criticized the Fed, praised bonds and gave a bleak outlook for 2023. Loading Something is loading.
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David Rosenberg has warned the S&P 500 could fall another 27%, predicted long-term bonds will rise more than 20% next year, and ruled out the stock market bottoming out anytime soon.
The veteran economist and Rosenberg Research chief reflected on his experience as a Wall Street economist on Black Monday — which happened almost exactly 35 years ago — during a RealVision interview released this week. He also accused the Federal Reserve of pushing up asset prices and gave a bleak outlook for 2023.
Here are Rosenberg’s 8 best quotes, slightly edited for length and clarity:
1. “My first day stepping on a trading floor, there were people waving at the chandeliers. It was chaos. And it was a terrifying experience. I will never forget it.” (Rosenberg’s first day as an economist at the Bank of Nova Scotia was October 19, 1987 — so-called Black Monday, when the Dow lost nearly 22% in one session.)
2. “If that happened to you, you’d be Eeyore the donkey for the rest of your professional life. They call me the perma bear. It’s almost genetic somehow.”
3. “They wanted to blow up again. They’re like a clown in the circus, inflated the balloon. And now the balloon is – I’m not saying it’s bursting, but helium is definitely coming out of the real estate market.” (Rosenberg criticized the Federal Reserve for inflating asset prices in recent years.)
4. “They want the stock market to fall. They want house prices to fall. Why? Because there is no snowball chance in hell, they will hit their 2% holy grail of consumer inflation, with no period of asset deflation now. 100% necessary.” (Rosenberg was referring to the Fed trying to push inflation from above 8% in September to about 2%.)
5. “In a bear market bear market, 83.5% of the previous situation is reversed in the bull market. You’re looking at about 2,700 on the S&P. That’s where we’re going.” (Rosenberg’s estimate suggests that the benchmark stock index, which has fallen 23% this year to about 3,700 points, could fall another 27%.)
6. “You haven’t seen anything yet. All the bad things are ahead of us because of the delays. Next year will be the year when we get the financial spasm. Next year will be the year when the Fed – as it always does – will ‘uncle’ yell and say we’re done.” (He noted that so far the stock market has only returned to its long-term average and there has been no earnings recession yet.)
7. “70% of the way to the Fed easing cycle, and 70% of the way to the recession, is when the stock market usually bottoms out. They are tightening in an inverted yield curve today, but there will be easing and steepening of the curve next year. I plan to become a permabull at that time.”
8. “I think the total yield of the long bond will probably be over 20% next year. I don’t think the stock market will make 20% next year.” (Rosenberg said it was a “big mistake” not to buy long-term bonds based on their recent weakness, as he expects bonds to be the first asset class to recover from the current downturn.)