David Rosenberg hit rock bottom before the financial crisis. He believes rising interest rates will send the economy into deep water next year.
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With his gloomy forecasts for the American economy, Rosenberg is much more pessimistic than the market and the American central bank.
– The period of fastest rate increases since the 1980s is starting to take hold, Rosenberg writes in a note, according to Business Insider.
He directs Rosenberg Research and was previously at the top of the large American bank Merrill Lynch.
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– Families are feeling the consequences of the most aggressive tightening of monetary policy since the 1980s. The last time we saw such a financial burden tied to credit cards and auto loans was during the 2008 financial crisis, she says.
In the past, Rosenberg got his predictions right in the run-up to the financial crisis, but he was also wrong when he predicted a decline in stocks in 2021. The economist is known for being pessimistic.
Medicine of great interest
The powerful US central bank, the Federal Reserve (Fed), has raised interest rates from zero to a range of 5.25 to 5.50 over the past two years. The increases are intended to act as medicine against the high price inflation that has hit much of the world.
The idea behind the increases is to slow economic activity. Several countries raised the benchmark interest rate at a high pace, and price inflation began to decline.
Michael Reynolds, a strategist at Glenmede, is concerned about the development and believes the increases could lead to a prolonged economic downturn.
– The clock started ticking early this fall, he tells the Wall Street Journal.
Go against the grain
The prevailing view in the market is that the United States will manage a so-called soft landing. This means that price growth reaches the target of about 2%, without sending the economy into a prolonged recession. A widely used technical definition of recession is that of negative economic growth for two consecutive quarters or more.
In the USA, the price increase has currently fallen to 3.1%, as shown by the latest data from mid-December.
– Recently, the Fed has become more duetduet“Hawkish” and “duet” describe opposing beliefs about what interest rates the financial picture requires. A “hawk” advocates higher interest rates, while a “dove” wants lower interest rates. AND open to three interest rate cuts next year. The market is even more positive, says Sara Midtgaard, senior economist at Handelsbanken at the beginning of December.
The market priced in a total of six interest rate cuts on Sunday afternoon.
However, American economist Rosenberg believes that 2024 will be a difficult year and compares the development with the trend of previous economic crises.
– We have been experiencing a soft landing all year round, just like in 1979, 1989, 2000 and 2007. The soft landing is the transition phase, the bridge, from expansion to contraction, which I think will be the story of next year, He says.
2023-12-31 14:50:03
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