The US stock rally has no fundamentals and Fed rate hikes will 'break the back' of something in markets, top economist David Rosenberg says
"I don't know if the market is telling you anything about earnings, anything about the economy. It's been a sentiment and momentum-driven market, I think rather devoid of the fundamentals. And at some point, the Fed's tightening, which is unending, is going to break the back of something," he told the outlet.
The Rosenberg Research chief said there's a risk the Fed will hike interest rates by two or more times this year – and that's bad news for the US economy. Rising interest rates boost debt costs for companies and individuals, discouraging investment and spending. "The next 12 months is going to be really rough. That's when all the lags of the Fed are really going to be kicking in hard," he said.
The Fed has boosted benchmark rates by 500 basis points since March 2022 – the steepest increase since the 1980s. "I don't think this Fed has confidence in its forecast or confidence in its models. It is basically telling us that it is data-dependent. But I've never seen a central bank so focused on the data that are inherently contemporaneous and lagging," Rosenberg said.
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