- David Rosenberg has warned that the US economy is heading for a “hard landing” or major downturn.
- The seasoned economist cited the Philadelphia Fed’s manufacturing survey, a proven recession indicator.
- Rosenberg told Insider in February that the S&P 500 could fall 25% from its current level.
Don’t hold out hope for a mild slowdown as the US economy is set to suffer a severe recession, David Rosenberg warned.
“Look carefully at this chart and tell me we’re headed for a ‘soft’ or ‘no’ landing,” he said. tweeted THURSDAY. “More like a landing ‘crash’.”
The veteran economist was referring to the Philadelphia Fed’s monthly survey of manufacturers, which checked in its seventh consecutive negative reading in March. More than 34% of businesses surveyed reported a drop in activity, and new orders and shipments hit their lowest levels since May 2020.
Rosenberg attached a chart showing the metric has consistently dipped in each of the past eight recessions.
“Philly Fed at an 8-to-8 level on recession calls and no evasions,” Rosenberg said.
—David Rosenberg (@EconguyRosie) March 16, 2023
The president of Rosenberg Research and former chief North American economist at Merrill Lynch has been sounding the alarm bells on financial markets and the economy for some time.
“Another sign that Powell has finally emptied the last ounce of punch from the bowl,” he said. tweeted earlier this week, referring to Fed Chairman Jerome Powell. He was commenting on the fact that equities have not rallied, despite growing expectations that the Fed will not raise interest rates this month.
“It smells of a crisis of confidence,” he added in another tweet this week.
Rosenberg said recently Insider that the inflationary threat has faded and a US recession is all but guaranteed. He also warned that the S&P 500 could fall almost a quarter from its current level at around 3,000 points, and that house prices could fall 25% below their peak for the year. last.
Inflation hit a 40-year high last year, prompting the Fed to raise interest rates from near zero to over 4.5% over the past 12 months. Higher rates increase borrowing costs and encourage saving relative to spending, which can dampen the pace of price increases.
However, they can also dampen demand, increase unemployment and depress asset prices, thereby increasing recession risks. In addition, they can exert pressure on banks’ bond holdings, as bond prices move inversely to interest rates. This was a factor in the Silicon Valley Bank market crash last week.