Tags: David Rosenberg | Trump | Stock Market | Rally

David Rosenberg Sees 'Flattish Year' for Stocks With 'Tremendous Volatility'

David Rosenberg Sees 'Flattish Year' for Stocks With 'Tremendous Volatility'


Monday, 27 February 2017 02:33 PM

Contrarian economist David Rosenberg is warning of volatility ahead with the market finishing the year just where it started.

"Sentiment is extremely bullish and I am a notorious contrarian," he told Barron's.

"But the technicals have been positive and the market is being driven by momentum. It is not always about the fundamentals. When you get three things together—a sub-11 VIX [the CBOE Volatility Index], an 18 forward multiple, and 60%-plus bulls in Investors Intelligence— and you look at the history, you’ll see that upside to this market is extremely limited," he predicted.

U.S. markets have seemingly been setting record highs on a daily basis amid a Trump honeymoon with investors. Reuters reported.

"Volatility and uncertainty are underpriced. There will be better buying opportunities this year. Are we going into a bear market? No. We will have a flattish year, with a tremendous amount of volatility," said Rosenberg, chief economist and strategist at Gluskin Sheff & Associates,

He also just isn't buying the rosy scenarios painted by some other economists.

"I do not see the breakout in growth that risk assets are pricing," he said. "We’re going to average close to 2% real GDP growth this year, well below consensus. I don’t see the breakout that a lot of other economists are talking about," he said.

Trump's promise a few weeks ago of a "phenomenal" tax announcement helped rekindle a post-election rally, driving the main U.S. markets to record highs. 

But with details scant on how he planned to implement his agenda, investors have turned wary and the markets have traded range-bound.

"It is called the Trump Rally for a reason and if you take a look at the sectors that have outperformed, they are areas that would benefit from deregulation, repatriation, and tax reform. Based on where we are right now there is more room for disappointment than for any upside surprises," he said.

"The markets have given the administration the benefit of the doubt. The question is, how much patience does Mr. Market have, because it is very clear that there is no agreement on the border-adjustment tax, there is no broad agreement among House Republicans about whether tax reform should be revenue neutral, and if not, how far would we drive the deficit up?"

He also was cautious about some of Trump's policies.

"The most important words in the inauguration speech were “protection will lead to great prosperity and strength.” The border-adjustment tax was the answer to corporate-tax reform; it’s basically trade protectionism. That could lead to a potential trade war," he warned.

Trump's first address to a joint session of Congress on Tuesday evening is being closely watched by investors for clues on how he planned to carry out his agenda of boosting economic growth, 

"If we have a market that is willing to accept a roadmap that says we are going to repeal and replace Affordable Care Act and then have some form of tax reform by the August recess, I think the market will continue to be supportive," said Art Hogan, chief market strategist at Wunderlich Equity Capital Markets in New York.

(Newsmax wire services contributed to this report).

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Contrarian economist David Rosenberg is warning of volatility ahead with the market finishing the year just where it started.
David Rosenberg, Trump, Stock Market, Rally
Monday, 27 February 2017 02:33 PM
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