David Rosenberg: "There Are No More Bears Left" In This Market

Macro / Inflation / Rates (David Rosenberg view)

Core thesis

• The “inflation story” is overstated; disinflation is the base case.
• Inflation has largely been driven by cost-push shocks that are now unwinding, rather than persistent demand overheating.

Major inflation drivers cited (last ~6 years)

• COVID supply shock: global supply chain impairment (notably China)
• Labor shortage: government paying people not to work / enhanced unemployment
• Fiscal stimulus: $2 trillion fiscal stimulus (checks + extended unemployment insurance)
• Energy shocks: Russia–Ukraine war and later US–Iran war creating an energy shock

Counterfactual: why inflation isn’t higher

• Given the shocks, he argues the U.S. should have seen much higher inflation, yet headline inflation is only ~3% to 3.5% (depending on metric).
• Unit labor cost (productivity-adjusted wages) described as ~0.5% y/y (Q1 referenced) versus 3% a year earlier.

Key market-based inflation expectation / rates points

• Oil retraced much of the war-related spike.
• Gold down ~30%, CRB down ~13%, USD up ~6% (as of discussion).
• TIPS 10-year break-evens ~2.2%, described as lower than before the war.
• Rate expectations shifted: from pricing ~2 cuts to pricing a rate hike as early as September.
  • He attributes this more to Fed reaction-function fear than new real-economy deterioration.

Labor market characterization

• Nonfarm payrolls: warns against overreacting to month-to-month noise; emphasizes benchmark revisions and that the year-over-year trend is “flat.”
• Mentions household survey employment ~ -0.3% y/y (to the decimal place).
• Unemployment rate ~4.3%, helped by declining labor force participation.
  • If participation were unchanged, unemployment would be ~5.1% → “more slack” than headline suggests.

Consumer economics (big risk focus)

• Real disposable income growth ~0% over the past year (his claim).
• Savings rate: from ~8% pre-COVID → ~5% → ~3% recently.
• He argues spending is sustained by:
  • Wealth effects (401(k)s / brokerages for higher-income)
  • Credit cards for lower-income
• Credit stress indicators:
  • Credit cards: ~$1.3T unpaid balance at about ~20% interest
  • Delinquency rate ~15% (two-decade high, per discussion)

Explicit risk warning

• If the savings rate mean-reverts or credit tightens, he expects consumer recession risk—even if GDP spending still looks okay.

Commodities / inflation “rate of change” framing

• Inflation is about the rate of change, not absolute price levels (Volcker analogy).
• He expects negative CPI prints / benign core as energy effects drop out.
• Claims there’s been no meaningful spillover into core or wages (unlike 2021–2023).

---

Equity Markets / Positioning / Risk Management (contrarian: “no more bears left”)

Market regime metaphor

• Bull market = escalator up over time
• Bear market = elevator down (faster unwind)
• Historically: ~3/4 of bull-market gains get reversed in bear markets; if you’re late, prior gains can unwind quickly.

“All-in” behavior / concentration risk

• Portfolio managers’ cash ratios ~1% (per discussion).
• Household balance sheets:
  • ~73% of financial assets in equities
  • ~7–9% in bonds (he cites “not even 7% … in bonds” then later “Only 9%…”)
• Says equity sentiment is crowded: equities are “sexy,” bonds are “not sexy.”

Earnings / fundamentals—with caveats

• Earnings growth is strong, but concentration is key:
  • ~90% of earnings growth in the past year attributed to tech (and telecom)
  • ~70% of market cap expansion attributed to the same sectors
• Concentration described as higher than at the late-1990s bubble peak (in his framing).

Multi-factor stock market framework (“ingredients”)

• Price momentum (described as very strong)
• Technical picture (mixed to okay; referenced via an observation from Katie Stockton)
• Fundamentals:
  • earnings revision ratios
  • actual earnings growth
  • margins
• Valuations
• Sentiment
• Fund flows / positioning
• He notes technicals + momentum are supportive, but remains wary of crowding/herd mentality.

Credit as the “canary” (risk-management emphasis)

• “Credit always leads equities.”
• Points to widening speculative credit spreads:
  • Triple-C / BB spreads widening dramatically (his described “canary”)
• Notes private credit behaviors:
  • gating funds / capping redemptions by some managers—interpreted as a warning against risk-on exuberance.

---

Technology / AI / Data Centers / Financing “Complexity” (key investable concern)

Central change in the tech narrative

• Valuations for tech appear not to have adjusted, but underlying models have:
  • Companies once treated as “asset-light” are now capital intensive.
  • For the first time (in his words), companies are burning cash and forced to raise debt/equity.
• This occurs alongside major lenders capping redemptions (liquidity tightening).

AI/data-center capex boom as a cross-sector multiplier

• Claims tech capex is up double digits in real terms.
• AI data-center buildout creates spin-off effects across the economy (e.g., utilities).
• Says linkage to the AI/data-center theme is growing and extends beyond “tech and telecom.”

Hyperscalers / semiconductors staged unwind risk

• Even if Mag 7 has “rolled over,” broader damage can spread when ROI assumptions on long-dated capex break.
• Mechanism described:
  • overspending → future spending plans unwind partially → ripples into semis and supply chain.

Accounting / earnings quality critique

• Circular supply-chain/financing + depreciation/accounting can inflate apparent earnings:
  • “Company A” sells inputs to “Company B” recognizing revenue/margin
  • while buyer’s spend hits expenses earlier (timing/depreciation tax effects create skew)
  • and standard 12-month reporting/forward estimates can make earnings look more robust than economic reality
• Claims: adjusted for depreciation allowance effects, S&P P/E is ~30 (reported P/E vs adjusted reality).

Valuation anchor he prefers

• Shiller CAPE ~41
• Corresponds to:
  • real earnings yield ~2.4%
  • compared to real long bond yield ~2.7%
  • implies ERP is negative → markets imply equities behave like a less risky asset class
• He says he’s “not ready” to discard classic risk premia (references Harry Markowitz/CAPM).

---

Explicit instruments / tickers mentioned

Indices

• S&P 500
• Nasdaq

Stocks / company tickers referenced in-text

• Apple (AAPL)
• Cisco (CSCO)
• NVIDIA (NVDA)
• Microsoft (MSFT)
• Google
• Amazon
• Oracle
• Corning (GLW)

ETFs / products

• Mentions an upcoming ETF based on Rosenberg’s global macro research (no ticker provided in subtitles).
• Mentions a “model portfolio” behind the ETF concept:
  • ~50% equities, rest in bonds
  • ~10% gold & miners

Credit / debt instruments and markets (no tickers)

• TIPS and 10-year break-even inflation
• Two-year Treasury notes (context)
• Non-investment grade / private credit
• Mortgage credit (historical reference)
• “Debt and equity markets” (general)

---

Numbers & performance / reaction references (non-exhaustive)

Inflation / rates

• Inflation rate: ~3% to 3.5%
• Unit labor costs: ~0.5% y/y vs 3% a year earlier
• TIPS 10-year breakevens: ~2.2%
• Oil retraced; gold -30%, CRB -13%
• USD up ~6%

Consumer

• Savings rate: ~8% pre-COVID → ~3%
• Real disposable income growth: ~0%
• Credit cards: $1.3T balance, ~20% interest
• Credit delinquency: ~15%

Equities / valuations

• S&P P/E (adjusted claim): ~30
• Shiller CAPE: ~41
• Real earnings yield: ~2.4% vs real long bond yield: ~2.7%

Portfolio allocations (model)

• ~50% equities
• Significant bonds share (remainder)
• ~10% gold and miners

---

Methodologies / frameworks explicitly described

Macro / inflation framework

• Determine whether inflation is driven by:
  • rate-of-change vs level of prices
  • shocks that are cost-push and now unwinding
  • whether effects have second-round spillovers into core/wages

Stock selection / market assessment framework (“six ingredients”)

• Price momentum
• Technicals
• Earnings fundamentals (revision ratios, earnings growth, margins)
• Valuations
• Sentiment
• Fund flows / positioning

Risk-management framework (timing/behavioral)

• Avoid being late in bears; historical “3/4 reversal” of bull gains
• Watch for liquidity/credit stress:
  • credit spreads
  • private credit redemption gates

Valuation emphasis

• Use Shiller CAPE to smooth cyclical effects
• Compare implied equity risk premium (ERP) and real earnings yield vs real bond yield

---

Disclosures / disclaimers

• The host states the podcast is for informational purposes only and not relied upon for specific investment decisions (opinions of Dan Nathan, Guy Adami, and other participants only).

---

Presenters / sources mentioned (end of transcript)

Primary participants

• Dan Nathan (host)
• David Rosenberg (President & Founder, Rosenberg Research)

Other people mentioned

• Esther George
• Kevin Warsh
• Alan Greenspan
• Carter Braxton Worth
• Katie Stockton
• Michael Wilson
• Rich Bernstein
• Doug Kass
• Charles Merrill (historical reference)
• Edward Lynch (historical reference)
• Win Smith (book referenced; “1928 letter / Merrill” story)
• Jeremy Grantham
• Andrew Ross Sorkin (referenced via a 1929-related book)
• Harry Markowitz
• John Thain, Stan O’Neal (historical references)
• Cisco / US credit markets participants referenced indirectly (not as sources)