‘Shocking’ inflation will end, hurt reopening stocks: David Rosenberg – –

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‘Shocking’ inflation will end, hurt reopening stocks: David Rosenberg – –


Economist David Rosenberg believes the bond market is correcting for inflation and yields should not trade at higher levels.
His reasoning: Inflation as a temporary phenomenon caused by huge pent-up demand and supply chain issues related to the coronavirus pandemic.

“The numbers have been shocking on the rise, there is no doubt about it. But it’s pretty easy to explain, ”the president of Rosenberg Research told CNBC’s“ Trading Nation ”on Friday. “I don’t understand why people want to layer the last few months into the future. “

So far, the bond market ignores inflation. The benchmark 10-year T-bill yield hit its lowest level since March 3 on Friday and closed at 1.45%. The yield is down 7% over the past week and down almost 11% over the past month.

Slippery returns have been on Rosenberg’s radar for months.

At the end of February on Trading Nation, Rosenberg called the bond market “drastically oversold” and predicted that the 10-year yield would fall to 1%. At the time, the yield was about 1.5%.

“There is so much noise and distortion in the data,” said Rosenberg, who was Merrill Lynch’s senior North American economist from 2002 to 2009. “The most dangerous thing you can do is d ‘extrapolate what is happening now. “

“I refuse to hyperventilate because of the inflation. ”

In a note to investors on Friday, he wrote “I refuse to hyperventilate on inflation”. He thinks the other side of the skyrocketing growth is a plateau.
“This is the story of the second half of the year… The bond market is smelling that right now,” Rosenberg said. “My forecast is a slowdown in growth, a spike in inflation and a rebound and bullish flattening of the yield curve. “

This is a prospect that would pose a problem for the reopening of trade. Rosenberg predicts that consumer discretionary, much of it, will fall out of favor later this year.

“Growth is expected to gain the upper hand over value in the stock market,” he said. “You want to be more in defensive growth and in areas of the market that are going to benefit from lower bond yields. “

Bitcoin breakout coming?

Rosenberg may be expecting trouble reopening the trade, but he also believes bitcoin is ideal for a resurgence. The cryptocurrency has taken off, down 38% in the past two months.

He also wrote on encouraging signs on Friday that bitcoin is gearing up for “another blow to the top.” He further suggested that there is technical evidence that the overbought conditions are unfolding.

Still, he still won’t fully embrace Trump.

“I don’t own bitcoin. I never recommended anyone to buy it. It seems to me that crypto is here to stay. There is no doubt as a facilitator, a means of exchange, ”he said. “Bitcoin, for me, is speculative trading. I don’t see it as a good faith investment. “

Rosenberg prefers gold, an asset he has owned for years.

“I’m just saying buy the gold,” Rosenberg said. “Gold has 1/5 the volatility of bitcoin. “

Gold is up 8% in the past two months. However, it’s down about one percent so far this year.

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