Preparing for ‘Crash Landing’ as the US Economy Heads for Recession: Rosenberg

David Rosenberg.
Rosenberg Research & Associates

  • David Rosenberg has warned that the US economy is headed for a “crash landing” or major downturn.
  • The veteran economist cited the Philly Fed’s manufacturing survey, a proven recession indicator.
  • Rosenberg told Insider in February that the S&P 500 could fall 25% from current levels.

Don’t hold out hope for a mild downturn as the US economy looks set to suffer a severe recession, David Rosenberg has warned.

“Take a good look at this chart and tell me we’re going into a ‘soft’ or ‘no’ landing,” he tweeted on Thursday. “More like a ‘crash’ landing.”

The veteran economist was referring to the Philly Fed’s monthly survey of manufacturers, which recorded its seventh consecutive negative reading in March. More than 34% of companies surveyed reported declines in activity, and both new orders and shipments hit their lowest levels since May 2020.

Rosenberg attached a chart showing that the metric has consistently fallen during each of the past eight recessions.

“The Philly Fed at a level that is 8 for 8 on the recession call and with no headwinds,” Rosenberg said.

The Rosenberg Research president and former chief economist for North America at Merrill Lynch has been sounding the alarm on financial markets and the economy for quite some time.

“A further sign that Powell has finally drained the last ounce of punch from the bowl,” he tweeted earlier this week in reference to Fed Chairman Jerome Powell. He commented on the fact that stocks did not rise, despite rising expectations that the Fed will not raise interest rates this month.

“It smacks of a crisis of confidence,” he added another tweet this week.

Rosenberg recently told Insider that the threat of inflation has faded and a US recession is virtually guaranteed. He also warned that the S&P 500 could fall by nearly a quarter from its current level to around 3,000 points and that house prices may bottom out 25% below their peak last year.

Inflation rose to a 40-year high last year, prompting the Fed to raise interest rates from near zero to upwards of 4.5% over the past 12 months. Higher interest rates raise borrowing costs and encourage savings relative to spending, which can slow the pace of price increases.

However, they can also dampen demand, increase unemployment and drag down asset prices, increasing the chances of a recession. Furthermore, they can put pressure on the banks’ bond holdings, as bond prices move inversely in relation to interest rates. It was a factor in the shocking collapse of Silicon Valley Bank last week.

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