MacroVoices #433 David Rosenberg: Calling The FED’s Bluff
David Rosenberg argues the U.S. economy is slowing precipitously to stall speed, with first quarter GDP at only 1.3% and second quarter tracking around 1%, while the stock market's rally is driven by just three mega-cap stocks (NVIDIA, Microsoft, Apple) masking underlying economic weakness.
Summary
David Rosenberg presents a bearish outlook on the U.S. economy, arguing it's experiencing a significant slowdown to what he calls "stall speed" with first quarter GDP at 1.3% and his models showing second quarter growth at approximately 1%. He believes the economy is setting up for a delayed recession as fiscal stimulus effects fade and excess savings are depleted. Despite this economic weakness, the stock market continues hitting new highs, which Rosenberg attributes to just three stocks - NVIDIA, Microsoft, and Apple - representing 20% of the index. He argues the market's breadth is terrible, with economic-sensitive sectors already peaked and rolling over. On inflation, Rosenberg strongly disagrees with calls for a resurgence, pointing to widespread consumer resistance to current price levels and corporate loss of pricing power. He sees a disinflationary environment emerging as demand grows at 1-1.5% while supply capacity expands at 3-3.5%. He expects the Fed to cut rates twice in 2024, starting in September, and believes bonds will deliver equity-like returns. Rosenberg views China as following Japan's path into secular economic decline due to real estate deflation and demographic challenges. He recommends defense/aerospace, cybersecurity, emerging markets like India and Mexico, and expects gold and commodities to benefit when the dollar bull market ends.
About this episode
MacroVoices Erik Townsend & Patrick Ceresna welcome back, Rosenberg Research founder David Rosenberg. They discuss, the stock market and why David believes the breadth isn’t there, and the outperformance of SPX is really just three out of the 500 stocks in the index. https://bit.ly/3VRJtBA ⚫ Check Out Rosenberg Research: https://www.rosenbergresearch.com/ ⚫ Follow David Rosenberg on X: https://www.twitter.com/econguyrosie 🔻Download Big Picture Trading Chartbook: 📈📉: https://bit.ly/3KT5tWi ✅Sign up for a FREE 14-day trial at Big Picture Trading: https://bit.ly/46Ul2FD 🔴 Subscribe to Patrick’s Youtube Channel: https://www.youtube.com/@Patrick_Ceresna 🔴 Subscribe to Erik's Substack: https://eriktownsend.substack.com/ 🔴 Check out Energy Transition Crisis on YouTube: https://www.youtube.com/@EnergyTransitionCrisis1 🔴 Check out Nick's YouTube channel: https://www.youtube.com/c/Optionfinity ✅ Join OptionFinity discord: https://discord.gg/Rvnsv6Y 🔴 Subscribe to Nick’s Medium: https://medium.com/@ngalarnyk Please visit our website https://www.macrovoices.com to register your free account to gain access to supporting materials
Key Insights
- Rosenberg argues the U.S. economy is slowing precipitously to 1.3% in Q1 and tracking around 1% for Q2, which he considers stall speed territory
- He claims the stock market rally is driven by just three stocks (NVIDIA, Microsoft, Apple) representing 20% of the index while economic-sensitive sectors have peaked
- Rosenberg strongly disagrees with inflation resurgence calls, arguing supply is growing 3-3.5% annually while demand grows only 1-1.5%
- He identifies widespread consumer resistance to current price levels and corporate loss of pricing power as key disinflationary forces
- Rosenberg expects the Fed to cut rates twice in 2024, starting in September, with a second cut in November after the election
- He argues China is following Japan's path into secular decline due to real estate deflation, demographics, and trade tensions
- Rosenberg believes bonds will deliver equity-like returns over the next 12 months as rates decline
- He sees defense/aerospace as a secular theme due to global military buildup and regional conflicts
- Rosenberg argues the current economy lacks catalysts for reacceleration, with fiscal stimulus and excess savings in the rearview mirror
- He predicts the market will be surprised by a deflationary rather than sticky inflation environment
- Rosenberg recommends emerging markets like India and Mexico as more attractive than expensive U.S. markets
- He expects gold and commodities to benefit when the U.S. dollar bull market ends following Fed rate cuts
Topics
Transcript
This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Ceresna. Macro Voices episode 433 was produced on June 20th, 2024. I'm Eric Townsend. Rosenberg Research founder David Rosenberg returns as this week's feature interview guest. Rosie says the breadth just isn't there in the stock market, and the outperformance of the spooze is really just three out of the 500 stocks in the index. And I'm Patrick Ceresna. Patrick Ceresna with the…
Full transcript available for MurmurCast members
Sign Up to AccessMore from Macro Voices
MacroVoices #547 Daniel Lacalle: The Future of Reserve Currency
Daniel Lacalle argues that governments have exceeded the three limits (economic, fiscal, and inflationary) that maintain currency credibility, threatening the U.S. dollar's reserve currency status. He contends that stablecoins and decentralized currencies will eventually replace centralized fiat systems, with the Trump administration's pro-crypto stance potentially either cementing or disrupting dollar dominance depending on fiscal prudence.
MacroVoices #546 Darius Dale: Darius Dale for POTUS 2028
In MacroVoices #546, Darius Dale discusses the current state of economic policies, financial markets, and geopolitical risks while emphasizing the significance of evolving market dynamics influenced by federal interventions. Dale's analysis highlights the potential implications for growth, inflation, and asset performance amid increasing government debt and intervention strategies.
MacroVoices #545 Michael Howell: Warsh vs. The Markets
Michael Howell discusses global liquidity cycles and their impact on asset markets, arguing that the liquidity peak in late 2025 has begun rolling over and will likely bottom in mid-to-late 2027. He contends that gold has likely bottomed and should rally significantly due to Chinese monetary expansion and Western debt monetization, while warning that equities face headwinds as bond yields rise and the Fed may need to tighten despite political pressure.
MacroVoices #544 Viktor Shvets: How Markets Survive Disruption
Viktor Shvets discusses the paradox of disinflation as the dominant long-term trend while near-term inflationary spikes persist from policy decisions, the deterioration of the Federal Reserve's independence and cohesion under Chair Kevin Warsh, escalating geopolitical conflicts with no clear resolution, and the K-shaped economy driven by AI-induced wealth concentration that is fueling dangerous levels of political polarization.
MacroVoices #543 Jim Bianco: Who Solves Inflation The FED or The Market?
In the latest Macro Voices episode, Jim Bianco discusses the Fed's recent decisions and their implications for inflation and long-term bond yields, highlighting the independence of Fed voters in the decision-making process. He argues that the bond market's reaction indicates persistent inflation concerns and that either the Fed must raise rates or the market will force higher yields.