David Rosenberg Warns S&P 500 May Plunge 27%, the Worst Is yet to Come

  • The S&P 500 could fall another 27% to around 2,700 points, David Rosenberg warned.
  • He ruled out a market bottom anytime soon and said “Black Monday” made him a perennial pessimist.
  • The seasoned economist criticized the Fed, touted bonds and issued a bleak outlook for 2023.

David Rosenberg warned that the S&P 500 could plunge another 27%, predicted that long-term bonds would rise more than 20% next year and ruled out the stock market bottoming anytime soon.

The veteran economist and head of Rosenberg Research discussed his experience as a Wall Street economist on Black Monday — which happened almost exactly 35 years ago — during a Interview with RealVision released this week. He also accused the Federal Reserve of driving up asset prices and issued a gloomy outlook for 2023.

Here are Rosenberg’s 8 best quotes, slightly edited for length and clarity:

1. “The first day I walked into a trading room, there were people swinging at the chandeliers. It was chaos. And it was a scary experience. I’ll never forget it.” (Rosenberg’s first day as an economist at the Bank of Nova Scotia was October 19, 1987 – the so-called Black Monday, when the Dow lost nearly 22% in a single session.)

2. “If this happened to you, you would also be Eeyore the donkey for the rest of your professional life. They call me the permanent bear. It’s almost genetic in a way. »

3. “They wanted to pump themselves up. They’re like a clown at the circus, they blew the balloon. And now the balloon is — I’m not saying it’s popping, but there’s definitely helium coming out of the balloon now. estate market.” (Rosenberg criticized the Federal Reserve for inflating asset prices in recent years.)

4. “They want the stock market to go down. They want house prices to go down. Why? consumer inflation, without there being a period now of asset deflation. It’s 100% necessary.” (Rosenberg was referring to the Fed trying to bring inflation down from over 8% in September to around 2%).

5. “In a bear market in recession, 83.5% of the previous bull market condition reverses. You’re looking at something like 2,700 on the S&P. That’s where we’re heading.” (Rosenberg’s estimate suggests the benchmark stock index, down 23% this year to around 3,700 points, could fall another 27%.)

6. “You ain’t seen nothing yet. All the bad things are ahead of us because of the delays. Next year will be the year we have financial spasms. Next year will be the year the Fed – like he always does – will shout ‘uncle’ and say we’re done.” (He noted that the stock market has only returned to its long-term average so far and there has been no earnings recession yet.)

7. “70% of the way to the Fed easing cycle and 70% of the way to recession is when the stock market typically bottoms out. They are tightening into an inverted yield curve today , but there will be an easing and steepening of the curve next year, at which point I intend to become a permabull.

8. “I think the total return on long bonds should be over 20% next year. I don’t think the stock market will do 20% next year.” (Rosenberg said it was a “big mistake” not to buy long-term bonds due to their recent weakness, as he expects bonds to be the first asset class to recover. of the current slowdown.)

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