David Rosenberg: Why the Market Keeps Rallying

Good thoughts here from David Rosenberg who appeared on Surveillance with Tom Keene yesterday.  He says the market is rallying because it’s been given no reason to decline.  In essence, the key tail risks have been removed from the market:

  • Europe didn’t fall apart.
  • The fiscal cliff didn’t destroy the US economy.
  • China achieved a soft landing.

He also touched on the recent declines in gold.  Rosenberg says that the brighter outlook means golds hedging component no longer serves its purpose.  I’d add that a better outlook means less central bank easing and the potential for higher real rates.

See the full interview here:



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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • GreenAB

    i think he is wrong.

    -europe is still weak (see todays PMI)
    -the effects of the fiscal cliff cannot be judged after one single month
    -China is a debate of it´s own. i don´t rely on official data but on reports of chinese companies. and they still look weak. watch copper (breaking down)

    the key to the current strength are fund flows. with a market near all time highs and yields very low wall street has declared 2013 the year of stocks.

    i worked in the industry and you have to turn over your clients portfolios to earn money. sitting in boring bond funds does nothing good to your bottom line.

    after the huge jump we saw after the fiscal cliff deal we seem to have entered a self feeding cycle. who doesn´t want to be on board when the dow breaks its all time high?

    the question is how long can the bond – stock rotation flows keep the market up?

  • Mercator

    I think two things confuse people. Massive stimulus to keep the economy in a levitated state, and belief that the resulting bubbling-over stock market is the economy. Most people agree that economic manipulation has been unprecedented over the last 5 years. I think we still have the surprise of unintended consequences in store for us in this great experiment. History will get it right. IMHO, the final chapters have not been written, and big and what will seem to be obvious surprises are coming. Just not obvious yet.

  • Mr. P

    I like Rosie but I think he has lost a lot of credibility over the last several years as his analysis has been wrong from 2009 until now….

    He appears to be bullish now that the market is going up…

  • Cowpoke

    What, no mention od Sequestration?

  • Detroit Dan

    This doesn’t feel right. It’s equivalent to saying the market is going up because people feel good. Certainly, the trends in Europe and the U.S. are not good, with growth below 0 last quarter and the U.S. ramping up austerity

  • Alberto

    People are feeling good ? Where ? Let me know and I will move there, it’s so depressing living in a depressed place with depressed people all around.

  • Boston Larry

    Today’s European PMI was quite weak, see: http://www.marketwatch.com/story/euro-zone-feb-pmi-signals-steeper-downturn-2013-02-21

    Also Andy Xie details how China may be at risk of having its bubble burst. It is overly dependent on Fixed Asset Investment (FAI).
    See: http://articles.marketwatch.com/2013-02-20/industries/37178267_1_fai-bank-deposits-loans

    These twin tail risks are fatter than most people think. Which one will blow up first, Europe or China?

  • Detroit Dan

    In the stock market…

  • Detroit Dan

    It may not be matter of “blowing up” but rather of ongoing stagnation in the real economy. The blow-up will be when the stock market recognizes that it’s gotten way ahead of the real economy…

  • coolhead

    Agreed. This big cycle has not been finished till the Fed raises the rate to a historically normal level. There are several options in front of key players in 2008. It is very hard to argue which one is the best. However, since they picked current path, the cycle is prolonged.

  • Anonymous

    Broad market reversals occur when everybody is on one side of a trade. Remember stocks do not move higher without sellers.

  • Andrea Malagoli

    My thoughts exactly. This is very uncharacteristic of him. Perhaps he is too afraid to be proven too bearish again … just when that might start working!

  • http://www.nowandfutures.com bart

    Call for Rosenberg… your markets are down big the last 2 days.

    I got a topping alert signal on Monday, went short yesterday morning and added substantially to the short position today. Stops are in place.

  • http://pragcap Michael Schofield

    Been taking stops on longs while entertaining myself trading UVXY. Bought some SPY puts today mainly for hedge but also some longs on pullbacks… Good chance it all goes bad eventually but probably we wait for that. Your top call may work IMO if bearish volume doesn’t dry up, and it needs to dry up fast (which I’m betting it will). Otherwise money comes into stocks, for lack of alternatives. My favorite topping indicator is the good ol’ IBD distribution method and it is touching negative. Ugh.

  • KB


    Please, stop jesting at David. I think he is correct. We only need to add FOR NOW to all these three statements. I would also add the forth one – a recession in the US did not happen. I am not sure about FOR NOW in this one, but there is very little doubt in the market.

  • Andrew P

    Just walk through Tyson’s Corner, Potomac Mills, or Pentagon City. High end malls are doing far more business now then they were during December 2012. Someone is spending lots of money.

  • Explorer

    Rates have been falling for 30 years since inflation started easing!

    What is your “normal” rate?

  • Anonymous

    I love Rosie and his analysis but hate his predictions. Remember the 99 percent sure there will be a recession on cnbc a year or two ago?? Unfortunately, I really bought into his analysis and took some chips off the table. Guess that is what I get for listening to a good economist but bad market predictor.

  • their

    A good economist will be able to explain tomorrow why what he predicted yesterday did not happen today. Mr Rosenberg is definitely a good economist.