STOCKS ARE OVERVALUED AND A RECESSION IS ALMOST CERTAIN, TOP ECONOMIST DAVID ROSENBERG SAYS

FROM: MARKETS.BUSINESSINSIDER.COM

President of Rosenberg Research and a veteran economist, has cautioned that investors may be celebrating too soon after the Dow Jones Industrial Average reached a record high. Despite Federal Reserve Chair Jerome Powell's positive outlook, Rosenberg believes the Fed's growth projections indicate overpriced stocks and a looming recession. He questions why the stock market anticipates a 10% rise in corporate earnings for the next year when the Fed only expects 3.8% nominal economic growth in 2024.

Rosenberg emphasizes that equity valuations currently show no embedded recession risk, stating that stock investors are overly optimistic. He also points out that the Fed's forecast of slower GDP growth in the coming year implies a 90% probability of recession. Rosenberg's team predicts a significant drop in inflation below 1%, making achieving 3.8% nominal growth challenging, with 2% being more realistic.

Considering monetary policy lags and the withdrawal of fiscal stimulus, Rosenberg suggests that real GDP growth in 2024 might be no better than +1.0%, possibly even zero, a scenario seen in past recession years such as 1949, 1954, 1958, 2008, and 2009. 

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