David Rosenberg struck a chord before the financial crisis. He believes the interest rate increases will send the economy into deep water next year.
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With his gloomy forecasts for the US economy, Rosenberg is far more pessimistic than the market and the US central bank.
– The fastest rate-raising period since the 1980s is starting to bite, writes Rosenberg in a note, according to Business Insider.
He heads Rosenberg Research, and was previously top at the major American bank Merrill Lynch.
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– Households are feeling the consequences of the most aggressive tightening of monetary policy since the 1980s. The last time we saw a similar financial burden linked to credit cards and car loans was during the financial crisis in 2008, he says.
In the past, Rosenberg has hit on his predictions ahead of the financial crisisbut he has also been wrong when he waited share decline in 2021. The economist is known to be pessimistic.
Powerful interest medicine
The US’s powerful 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 a medicine against the high price inflation that has affected large parts of the world.
The idea behind the increases is to slow down activity in the economy. Several countries have raised the key interest rate at a high pace, and price inflation has started to fall.
Michael Reynolds, strategist at Glenmede is concerned about the development and believes the increases could lead to a sustained economic downturn.
– The clock started ticking early this autumn, he adds The Wall Street Journal.
Going against the flow
The prevailing opinion in the market is that the US will manage a so-called soft landing. This means that price growth reaches the target of around two percent, without sending the economy into a sustained recession. A widely used technical definition of recession is negative economic growth for two consecutive quarters or more.
The price increase has now come down to 3.1 per cent in the USA, the most recent figures from mid-December showed.
– Recently, the Fed has become more duetduet“Hawkish” and “duet” describe opposite beliefs about what interest rates the financial picture requires. A “hawk” supports higher interest rates, while a “dove” wants lower interest rates. and opened for three interest rate cuts next year. The market is even more positive, said senior economist at Handelsbanken Sara Midtgaard earlier in December.
The market priced in a total of six interest rate cuts on Sunday afternoon.
However, the American economist Rosenberg believes that 2024 will be a tough year, and compares the development with the course of previous economic crises.
– We have been through a soft landing all year, just like in 1979, 1989, 2000 and 2007. The soft landing is the transitional phase, the bridge, from expansion to contraction, which I think will be next year’s story, he says.
2023-12-31 14:50:03
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