David Rosenberg, a well-known bear on Wall Street and founder of Rosenberg Research, said he thinks U.S. inflation will fall below 3% next year, and the Federal Reserve (Fed) is now raising interest rates aggressively, which is creating an economic storm, 2023 I’m afraid it will be a very difficult year.
“There’s an economic storm brewing, and 2023 is going to be a very, very tough year,” Rosenberg said in an interview.
Rosenberg warned that if the Fed continues to tighten monetary policy, it might lead to falling house prices, a credit crunch in the banking sector, and it might also weaken consumer confidence and spending, prolonging the downturn.
Rosenberg believes that there is already more and more evidence that inflation is fading, such as supplier delivery delays have returned to pre-pandemic levels, while commodity prices have also fallen into a bear market, freight rates have fallen sharply, and the U.S. labor market has also is softening.
“Our models suggest that headline inflation will fall from over 8% now to below 3% over the next 12 months, but by then it will be too late to rescue the economy,” Rosenberg said.
Rosenberg criticized the Fed for “being bitten by a snake once, and afraid of straw for ten years.” He believes that the Fed’s behavior has been “overkill.”
Notably, Rosenberg warned investors not to expect an immediate rebound in stocks once the Fed starts easing monetary policy once more. He thinks the stock market will pause for a while and won’t really hit a bottom until late next year or in 2024.
