David Rosenberg: “There will be another big correction in the stock market”

He is not sure when it will happen, but David Rosenberg is confident investors will face another big correction in the stock market.

Rosenberg spoke via webinar at the annual conference held by the Portfolio Management Association of Canada (PMAC). Rosenberg is the president, chief economist and strategist of Rosenberg Research & Associates, a firm he founded in 2019 after serving in similar strategist roles at Gluskin Sheff and Merrill Lynch.

A consensus view among Wall Street analysts is that, “We’re looking across the valley,” particularly following the encouraging announcements of vaccine results by Pfizer and Moderna.

But that valley has plenty of land mines, Rosenberg said.

He reminded the audience that the TARP 1 program, which was viewed as a rescue measure “across the valley” during the global financial crisis, was followed by a 30% correction. We could have a double-dip recession before the vaccine is deployed, he warned.

During all 11 post-war recessions, investors could see across similar valleys, he said, but there was always a 30% market correction. That happened despite the “famous selling lines” from the bulls, like “there is no alternative (TINA)” and there is a “ton of dry powder waiting to be deployed.”

Gridlock, especially if Republicans maintain control of the Senate, will increase the likelihood of a lack of fiscal stimulus and of another downturn. “This is a global economy with a fiscal addiction,” he said.

The virus is “out of control,” he said; hospitalizations are rising and the U.S. is facing widespread partial shutdowns. “We are not paying enough attention to the strain on the health system.” Since February, the U.S. has lost about 600,000 medical system workers, which he called “a complete travesty.” Many of those job losses were due to people leaving the workforce because they retired, were “burnt out” or needed to stay at home to care for family members.