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Rosenberg: Buy Bonds, Dividend Stocks

By    |   Thursday, 15 Oct 2009 10:47 AM

Economist David Rosenberg says the recovery will be weak and thus recommends that investors buy bonds and dividend-paying stocks.

“Right now the economy is being held together by very strong tape and glue provided by the Fed, Treasury, and Congress,” the chief economist for Gluskin Sheff and Associates, tells Bloomberg.

Without the government’s massive fiscal and monetary stimulus, there’s little to pull the economy out of the recession that began in December 2007, he says.

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Rosenberg, who saw the recession coming early, predicts the economy will stagnate this quarter and then grow no more than 2 percent next year.

The economy shrank 0.7 percent in the second quarter.

The recovery will resemble the “jobless” recovery of 2002, when the economy grew just 1.8 percent.

The economy won’t take on the “V” shape of previous rebounds, Rosenberg says.

“It’s going to look like this whole string of lowercase Ws for the next five years.” That means there will be periods of growth followed by periods of contraction.

As a result, “you want to maintain strategies aimed at income generation,” Rosenberg says. “There’s a shortage of income on the household balance sheet.”

That means bonds and dividend stocks.

Bob Doll, Blackstone’s head equity strategist, sees things differently than Rosenberg, but arrives at a similar conclusion.

Because risky assets are outperforming safer ones, Doll told CNBC it is wiser to buy blue-chip stocks and corporate bonds than Treasuries and money-market funds.

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Economist David Rosenberg says the recovery will be weak and thus recommends that investors buy bonds and dividend-paying stocks.“Right now the economy is being held together by very strong tape and glue provided by the Fed, Treasury, and Congress,” the chief economist for...
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