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Gluskin Sheff Chief Economist David Rosenberg on the outlook for the markets.
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-- move lower the SP so everybody can calm down the essence is still up 14%.
This year.
But my next guest says he thinks it's already reached its peak.
And he's taking -- David Rosenberg did you ever get out of taking cover -- that you've been about even in a cave for awhile haven't you.
Well you know the there's parts of the stock market that -- -- -- we have like night.
It has been in the non cyclical areas the market that have dividend growth dividend yield.
Dividend coverage characteristics.
Analyst that that -- still been.
Risk reward good places to be corporate bonds because of strong corporate balance sheets -- still in a big fan of -- long term because of all.
This currency printing by the major world central banks but the reality is that.
When interest rates -- zero.
You know you do have to find some belt somewhere to.
I generate at least some sort of an economic rent so I still believe that primary theme of generating income part of the portfolio you know whether that's within the equity market -- slices up -- that will deliver it.
Or -- within the credit market their corporate bond market -- this delirious I think that we can focus on not withstanding.
You know the gyrations in the headline averages.
-- but it's itself and it's likes to spend is you know they sliced them over over it to make Nelson in LA you know you look at what's going on between now and let's say December you say that the party is there people have showed up but the music and the band are not -- Do you expect they'll strike up -- bet by the end of the year what we see any form of the Santa Claus rally.
Well I guess if you're of the view.
And that's a Mitt Romney were to win the election.
And it and my sense is that since he is a unabashed capitalist than.
Pro free enterprise my sense is that Wall Street would from vercammen you have for example the senate -- the house go Republican -- -- Maybe that's not fully priced -- I.
I'm Elizabeth I don't say you're worried about that -- because to hedge fund managers brought this up to me in the -- why is nobody pointing out a look they just wanna make money but -- -- was nobody pointing out that since.
Mitt Romney has taken depending on which poll you look has taken a lead over the past two weeks or since that first debate.
The market has been down the market has had some really ugly days the likes of which we haven't seen in months.
So what makes you believe that that some type of Romney victory when it's been down since he took the lead.
Will somehow show or reversal here.
Well -- -- -- trying to answer your question about yo what what could be a surprise.
To the upside for the markets I I think that that is really quite spurious.
To say well since Mitt Romney caught up to.
Barack Obama that somehow that's the cost -- the market going down well you know let's let's get a reality check -- the market.
Maybe going down now because it realizes.
That there's really nothing new coming out of the -- for some time the Fed spent perhaps.
The last -- of -- chamber what this QE3 plots now admittedly.
That is forty billion dollars of mortgage backed security buying to perpetuity but that's already in the market so what's new coming out of the Fed up next the well.
Not much and we also have earnings season and while I think -- -- is expecting -- season to be squishy soft.
I don't think that most analysts are traders are strategists -- market participants were expecting.
That the sales part of the equation was going to be this week I mean only.
40%.
At best and be about a company so far are beating their target line will go on their bottom winds and so you start doing the -- protect.
You start seeing sales deflating at a time that profit margins -- cycle highs.
You you paint a pretty.
Bleak picture of what profits -- -- going forward so may well be that.
That the shift is really off central banks right now that's been the story for the year for the bulls.
And it's back on the fundamentals let's face -- liberals for earnings and sales right now for the broad market has not pause about.
United Technologies -- pot UPS all three of those.
Mentioned uncertainty in their guidance.
Up personally -- -- -- this on the show I think that any company that that cites uncertainty is a little bit of a cop out because he would go back.
Forty years since they've been taking business surveys the number one -- all businesses -- worried about.
We're taxes and uncertainties so that's just -- given I mean business people that tend to be more optimistic about things -- You know looking at where there is opportunity.
Going forward what would you say David you know you -- -- at the top of the segment about a couple places of people could.
Put their money -- argue would dividend believer that was the -- trade over the summer.
Well you know it's been willing to think about it -- that you know depending on your time perspective right.
You look over the past five years -- for the past ten years pretty well your total return equities has come out of the reinvested dividends.
And there might be temporary period three get this risk on trade because.
The ECB does want being here that had those wanting there.
But I think that dividend growth dividend yield dividend coverage I would still say that makes perfect sense in non cyclical parts of the market.
I think that still makes great sense I think that.
Credit arbitrage.
Or scarlet spread product still makes sense to me -- corporate spreads have tightened again for more they were.
At the beginning of the year but.
They still are quite wide by historical standards swamping that the Fed has done successfully the Fed can't really control the earning cycle.
That'll be determined by.
The corporate sector.
But the Fed has successfully list take an interest rate volatility over the -- the -- he actually.
Long lock in some very attractive interest rates -- corporate balance sheets -- like corporate earnings.
Are pretty good shape when -- point corporate bonds.
It's a surrogate for equities -- staking -- claim on the balance sheets in the balance sheets in corporate America and corporate -- for that matter.
Her -- -- -- still in the past fifty years I've actually rather blown away from a positive standpoint.
That even though the slowdown in the economy is generated this negative corporate income stream right now the corporate default rate has -- about 3% but still think you're getting paid.
Yeah there -- -- -- -- comes out on -- decision tomorrow maybe we'll get some clarification on what they're thinking David Rosenberg thank you he's above the shaft associates to the.
