FOLLOW US

David Rosenberg has cautioned the S&P 500 could decline another 27%, predicted long-dated bonds will skyrocket over 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 pumping up asset prices, and issued a bleak outlook for 2023.

Here are Rosenberg's 8 best quotes:

1. "My first day that I stepped onto a trading floor, there were people swinging from the chandeliers. It was mayhem. And it was a frightening 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 almost 22% in a single session.)
2. "If that happened to you, then you'd be Eeyore the donkey for the rest of your professional life as well. They call me the permabear. It's almost genetic in some way."
3. "They wanted to reflate. They're like a clown at the circus, blew the balloon. And now the balloon is — I'm not saying it's bursting, but there's surely helium coming out now of the real estate market." (Rosenberg was criticizing the Federal Reserve for inflating asset prices in recent years.)
4. "They want the stock market to go down. They want home prices to go down. Why? Because there's not a snowball's chance in hell they're going to get to their 2% holy grail consumer inflation, without there being a period now of asset deflation. It is 100% necessary." (Rosenberg was referring to the Fed trying to bring down inflation from above 8% in September to around 2%.)
5. "In a recessionary bear market, 83.5% of the previous bull market condition gets reversed. 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 at roughly 3,700 points, could slump another 27%.)
6. "You ain't seen nothing yet. All the bad stuff is ahead of us for because of the lags. Next year is going to be the year where we get the financial spasms. Next year will be the year where the Fed — as it always does — will scream 'uncle' and say we are done." (He noted the stock market has only reverted to its long-term average so far, and there hasn't ben an earnings recession yet.)
7. "70% of the way into the Fed easing cycle, and 70% of the way into the recession, is when the stock market usually bottoms. They're tightening into an inverted yield curve today, but there'll be easing and steepening of the curve next year. I intend at that point to become a permabull."
8. "I think the total return in the long bond is likely to be more than 20% of the next year. I don't think the stock market's making 20% in the next year." (Rosenberg said it was a "big mistake" not to buy long-dated bonds based on their recent weakness, as he expects bonds to be the first asset class to recover from the current downturn.)