WEBVTT - Rosenberg Research President David Rosenberg Talks Fed, Second Trump Term

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<v Speaker 1>Joining us right now for the half hour. David Rosenberg

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<v Speaker 1>of Rosenberg Research in Toronto. I need to explain this

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<v Speaker 1>to people that what is so important with David Rosenberg

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<v Speaker 1>is the heritage where you stole Merrill Lynch research for

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<v Speaker 1>no other reason, a guy named Farrell and a guy

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<v Speaker 1>named Rosenberg. He's continued that tradition. And if you steal

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<v Speaker 1>David Rosenberg's research, now it's about the re asserting of

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<v Speaker 1>a deflation area or disinflationary trend. David, do you once

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<v Speaker 1>again just say the permanence here is towards lower interest rates.

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<v Speaker 2>I do believe that wouldn't surprise me if the FAED

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<v Speaker 2>engages in what people would call a hawkish cut on

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<v Speaker 2>December eighteenth, signal a pause, and probably the dot plots

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<v Speaker 2>will go from four cuts to two, and then we

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<v Speaker 2>go to March, and I believe the data will then

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<v Speaker 2>push them back to predicting four cuts from two. So

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<v Speaker 2>these these dog thoughts move around a lot, because the

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<v Speaker 2>fed is just basically operates on a contemporaneous basis. But

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<v Speaker 2>I do believe that the trend in rates will be lower,

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<v Speaker 2>and I think that the trend in inflation is going

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<v Speaker 2>to be lower and I think that, you know, the

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<v Speaker 2>one thing that I'm confident of more now than it

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<v Speaker 2>was even a few weeks ago, is that we're not

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<v Speaker 2>going to be seeing the big terrifikes that were being

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<v Speaker 2>pledged during the campaign. It's very clear, just early on

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<v Speaker 2>before Trump's taken office, and we've seen how we standled

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<v Speaker 2>Mexico and Canada, that the tariffs are really being used

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<v Speaker 2>as a weapon to achieve, you know, other security goals.

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<v Speaker 2>I don't think we're going to get the big tariff increases.

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<v Speaker 2>I think that, you know, the economics team's put together

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<v Speaker 2>has been pretty impressive. I think that they're going to

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<v Speaker 2>incur ridge Trump to resist those temptations for a global

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<v Speaker 2>trade war, big tariff increases, and then what's left, what's

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<v Speaker 2>left is going to be a deficit reduction, and that's

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<v Speaker 2>not going to come from the President, but it's going

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<v Speaker 2>to come from Congress. David, the hunt and we're going

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<v Speaker 2>to get We're going to get deregulation and more oil production.

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<v Speaker 1>David, let me go to the heart of the method.

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<v Speaker 2>Of very difficult to believe that we're going to generate

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<v Speaker 2>an inflation cycle out of those developments.

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<v Speaker 1>David, the heart of the matter is that we had

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<v Speaker 1>a triple stimulus out of the pandemic. Let me a

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<v Speaker 1>question that many people ask, is the American exceptionalism. Is

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<v Speaker 1>the American boom and productivity nothing more than a follow

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<v Speaker 1>on of a unique stimulus that austere Europe didn't do.

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<v Speaker 2>Well. You know, the the productivity side really comes from

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<v Speaker 2>the supply side of the economy, not the demand side,

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<v Speaker 2>So there was really nothing. I don't think that we

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<v Speaker 2>can point to stimulus being the driver of productivity. Curiously enough,

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<v Speaker 2>what COVID managed to do and that's the reason why

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<v Speaker 2>productivity growth has been surprisingly strong. So we came out

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<v Speaker 2>of COVID with a productivity shift to the upside. And

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<v Speaker 2>the one sector actually that has led the growth in

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<v Speaker 2>productivity has not been technology or finance. It's actually been

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<v Speaker 2>the retail sector. Because during the pandemic and the lockdowns

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<v Speaker 2>and the aftermath, if you didn't digitize your business and

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<v Speaker 2>follow the Amazon model as a retailer, you're going to

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<v Speaker 2>go out of business. So even before what's happened on

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<v Speaker 2>the AI side, which the markets certainly believe that this

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<v Speaker 2>is going to be a productivity game changer, and it

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<v Speaker 2>probably will be. The post COVID environment and actually generated

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<v Speaker 2>this sort of productivity improvements that Japell has been talking about.

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<v Speaker 2>They're real. And then the question is going to be

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<v Speaker 2>for the next five or ten years, what will this

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<v Speaker 2>model shift from the inflection point on the technology curve

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<v Speaker 2>into the productivity in the future. And I will actually

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<v Speaker 2>tip my hat to the bulls who say that this

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<v Speaker 2>is going to be a game changer. David.

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<v Speaker 3>The Federal Reserve appears to be focusing on the labor market.

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<v Speaker 3>Here we got initial job as claims today a little

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<v Speaker 3>bit higher than expectations. What's your view of the US

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<v Speaker 3>labor market given that the Fed is really looking at it.

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<v Speaker 2>The way I would describe it is cooling but not contracting.

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<v Speaker 2>Even if we get the consensus estimate of call it

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<v Speaker 2>close to two hundred thousand tomorrow, you know, in the

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<v Speaker 2>context of what happened in October, that leaves you with

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<v Speaker 2>an average of about one hundred thousand. So the trend

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<v Speaker 2>is cooling off. I expect that that will continue. And

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<v Speaker 2>like most of the other parts of the economic pie,

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<v Speaker 2>I mean, the incoming data, I've just been so confusing.

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<v Speaker 2>I mean, you get the numbers from Jolts and they

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<v Speaker 2>show openings up but hirings down. You get the ADP

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<v Speaker 2>number out, and the ADP showed that hiring amongst large

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<v Speaker 2>businesses surged, but yet small companies, which are really in

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<v Speaker 2>the weeds of the economy a lot more than big companies.

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<v Speaker 2>Small companies on net have let people go in three

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<v Speaker 2>of the past four months. I read the bag Book yesterday,

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<v Speaker 2>and you know, I'm shrugging my shoulders as to how J.

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<v Speaker 2>Powell can talk about the economy being strong when the

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<v Speaker 2>bag Book itself had about two hundred and fifty references

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<v Speaker 2>to the economy either being slightly growing, modestly growing, or

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<v Speaker 2>just outright week only twenty nine times was the word

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<v Speaker 2>strong used in the Beige Book, and a fifty one

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<v Speaker 2>page document to which I say, you know, mister Powell,

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<v Speaker 2>if you're going to spend all the time, resources and

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<v Speaker 2>money on the Beige Book, why don't you at least

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<v Speaker 2>listen to it. What was very striking in the Beige Book?

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<v Speaker 2>And I would still say it's qualitative, it's not quantitative,

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<v Speaker 2>but it's not revised. It just gets updated every six weeks.

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<v Speaker 2>And I don't know if you guys went through it.

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<v Speaker 2>I went through it tooth and nail because that's what

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<v Speaker 2>I have to do. It's the most pleasurable reading in

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<v Speaker 2>the world. The labor market. I mean, there are elements

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<v Speaker 2>that improved in the past six weeks overall economic activity yes,

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<v Speaker 2>the consumer yes. But funny enough, the labor market was downgraded,

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<v Speaker 2>and there were numerous comments on how wage growth is cooling.

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<v Speaker 2>So how do you get wage growth cooling in the

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<v Speaker 2>labor market that everybody thinks is tight or tightening. So again,

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<v Speaker 2>we just are riddled with all these anomalies and inconsistencies.

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<v Speaker 2>But I would say that if you want to trend

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<v Speaker 2>out the data, labor market not contracting yet, but it

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<v Speaker 2>is cooling off.

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<v Speaker 1>David. One final question quickly here it is the Rosenberg

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<v Speaker 1>bull market.

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<v Speaker 2>Can you buy? Can you own stacks?

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<v Speaker 1>Here? David Rosenberg?

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<v Speaker 2>Well, I'm having my own epiphany right now on this

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<v Speaker 2>topic because, let's face it, it was the best year for

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<v Speaker 2>the stock market since twenty nineteen. I'm not alone. I mean,

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<v Speaker 2>the consensus at the end of last year for the

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<v Speaker 2>end of this year for the S and P five

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<v Speaker 2>hundred was forty nine hundred, and we've just blown through

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<v Speaker 2>six thousand, and I think that there's a couple of

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<v Speaker 2>things that are happening that should have you feeling bullish.

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<v Speaker 2>I'm still concerned over market positioning and sentiment is off

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<v Speaker 2>the charts, and I am expecting in your term correction.

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<v Speaker 2>The question is, which would be normal? Is what you

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<v Speaker 2>do if we get the debt? And I think that

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<v Speaker 2>you'd want to buy the debt. And I say that

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<v Speaker 2>because you know, I've been calling this a bub for

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<v Speaker 2>a while, but it's maybe a bubble if you look

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<v Speaker 2>at trailing P multiples or one year four P multiples.

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<v Speaker 2>But if in fact we've had an inflection point on

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<v Speaker 2>the technology curve, if we've had a model shift when

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<v Speaker 2>it comes to what AI is going to deliver in

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<v Speaker 2>terms of future profitability and productivity, I'm thinking that the

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<v Speaker 2>market is sending you a message that it is taken

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<v Speaker 2>that investors have basically lengthened their time horizons. So all

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<v Speaker 2>the classic evaluation metrics that I've been using, I'm not

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<v Speaker 2>going to say they're obsolete, but they're probably just not

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<v Speaker 2>relevant to today's backdrop. So I would say that, yeah,

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<v Speaker 2>I guess if you can want to color me more

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<v Speaker 2>probably more positive on the stock market on a secutor basis,

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<v Speaker 2>based on everything that I've seen this year in particular,

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<v Speaker 2>then yeah, I would say that, you know, expect the

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<v Speaker 2>near term correction. I think it would be normal considering

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<v Speaker 2>the nose levels rat However, I think it's a depth

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<v Speaker 2>that you probably will want to buy.

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<v Speaker 1>We're out of time, but next time you're on, we

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<v Speaker 1>want to talk to you about Canada as at fifty

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<v Speaker 1>first State and I'll love to see how that goes.

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<v Speaker 1>David Rosenberg's with Rosenberg at Research