- The hope that the US can keep growing robustly is just a “fairy tale,” according to economist David Rosenberg.
- In an interview with CNBC, Rosenberg pointed to the Fed’s aggressive rate hikes, which haven’t been fully felt in the economy.
- “I don’t think that there’s a ‘get out of jail free’ card for the economy,” he said, rebuffing hopes for a “no landing” scenario.
The hope that the US can keep growing robustly is just a “fairy tale,” and the economy isn’t going to be saved from a slowdown, according to economist David Rosenberg.
“I don’t think that there’s a ‘get out of jail free’ card for the economy, in the context of the most acute Fed tightening cycle and into the most inverted yield curve since 1981. We just haven’t seen the full brunt of the rate shock just yet,” Rosenberg said in an interview with CNBC on Friday.
Central bankers raised rates 450-basis-points over the past year in a scramble to fight sky-high inflation, a move that’s depressed stocks and caused a 40-year-record inversion in the yield curve, the bond market’s recession predictor.
“The no landing, it’s a nice fairy tale, but that’s what it is,” Rosenberg added.
His rejection of a “no landing” scenario comes as some market commentators point to robust labor market and GDP data as reasons to see an economy avoiding both a hard and soft landing to instead continue with strong growth.
The US added 517,000 jobs in January – more than double what economists expected – and GDP clocked in at 2.9% in the last quarter of 2022.
But such indicators overstate the economy’s strength, Rosenberg said, adding the while fourth-quarter GDP came in above expectations, economic activity was slightly negative in month-per-month terms.
His dim view has been echoed by other market commentators, despite the strong performance in stocks in January.
According to Morgan Stanley’s top stock strategist Mike Wilson, stocks are currently in the “death zone,” and the S&P 500 could crash 26% as downbeat earnings ravage the market this year.