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Economic Reality Check

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  • Description

    Gluskin Sheff chief economist and strategist David Rosenberg gives his outlook for the economy.

  • Duration 3:51
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Rising fuel costs just one of the many things my next guest says is putting pressure on US consumers.

And he's not convinced that were actually seeing an economic rebound joining me now David Rosenberg.

He is the -- -- -- chief economist and strategist David thank you so much for joining us.

This and -- you've kind of use the analogy of the US economy is like a drunk driver lurching from side to side.

Thankfully missing the ditch but.

Don't you think they economies sobering up to use that analogy a little bit -- yes it's slow and stayed even at least is heading in the right direction.

Well the direction certainly.

Is up but the trend.

Is slowing down and you know what what -- find amusing.

Is how so many people will look and see what the stock market is doing.

In any given point in time and then make up their mind well the economy must be in a boom lake mode because we -- -- are ripping equity market in January but here's the reality.

Fourth quarter GDP was minus point 1%.

Now we know that there are a lot of special factors.

Undermining that particular headline GDP but they -- the same factors that skewed.

The number to the upside in the third quarter we -- 3% so but what I find interest thing.

Is that nobody talked about the fact that the 3% quarter in the third quarter was skewed by special factors OOO.

But the fourth quarter negative point bubble just -- because the special factors.

I think what you want to do is really average up at two quarters and what you're talking -- is a one and a half percent growth economy.

Now is that got a plus sign a fun event I guess the answer is yes and that's the cup as half full.

But the economy is slowing down because in the previous four quarters we were averaging 2%.

Now -- -- trading GDP is about one and a half percent.

And I guess in the new normal you know that's a huge positive I remember I started the business for the 1980s.

You're starting average four and a half percent growth in GDP people start asking me are we headed for recession yeah and today and I thought well it's almost like economic Nevada but.

Economy is on.

Very soft ground full stop and that is exactly why the Fed continues to expand its balance sheet as much as that is doing.

Brian -- keeping interest rates close to zero for the foreseeable future because of the economy was not shaky ground the Fed would be doing what it's doing right now.

But as you say the markets -- have -- and it's amazing bull rom for some years now com what are you telling investors to get the heck out.

No not at all we -- actually.

Over the past year.

-- gradually increasing our equity allocation -- we're still running against any benchmark we are.

Underweight were 48% of our asset next 48%.

And equities.

But largely in income equity dividend growth dividend yield dividend coverage that the more or less -- -- -- could ever.

Talk about safe equities -- locality.

Low beta that's -- rents we've actually been raising -- the allocation.

-- doing it very judiciously at the same time but about the bond market David do you agree with those -- say it's it's in a bubble.

Well I don't think that bond market it in aggregate is then a bubble I think they you can point is certainly some segments of the REIT market that looks expensive.

When certainly the high yield market is is trading.

At levels above par that puts it -- in callable risk.

A situation high yield was actually cheapened up quite a bit.

Over the course the past couple weeks.

But I think investment grade -- high quality corporate bonds.

Is they offer us stability in diversification.

So I don't think that the bond market in general is that a bubble but there's certainly some segments that are certainly over the expensive right now wouldn't argue with that.

Larry give were already at a time David Rosenberg Quebec -- shift thank you so much -- David joining us we appreciate it.

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