Joining us right now for the half hour. David Rosenberg of Rosenberg Research in Toronto. I need to explain this to people that what is so important with David Rosenberg is the heritage where you stole Merrill Lynch research for no other reason, a guy named Farrell and a guy named Rosenberg. He's continued that tradition. And if you steal David Rosenberg's research, now it's about the re asserting of
a deflation area or disinflationary trend. David, do you once again just say the permanence here is towards lower interest rates.
I do believe that wouldn't surprise me if the FAED engages in what people would call a hawkish cut on December eighteenth, signal a pause, and probably the dot plots will go from four cuts to two, and then we go to March, and I believe the data will then push them back to predicting four cuts from two. So these these dog thoughts move around a lot, because the
fed is just basically operates on a contemporaneous basis. But I do believe that the trend in rates will be lower, and I think that the trend in inflation is going to be lower and I think that, you know, the one thing that I'm confident of more now than it was even a few weeks ago, is that we're not going to be seeing the big terrifikes that were being
pledged during the campaign. It's very clear, just early on before Trump's taken office, and we've seen how we standled Mexico and Canada, that the tariffs are really being used as a weapon to achieve, you know, other security goals. I don't think we're going to get the big tariff increases. I think that, you know, the economics team's put together
has been pretty impressive. I think that they're going to incur ridge Trump to resist those temptations for a global trade war, big tariff increases, and then what's left, what's left is going to be a deficit reduction, and that's not going to come from the President, but it's going to come from Congress. David, the hunt and we're going to get We're going to get deregulation and more oil production.
David, let me go to the heart of the method.
Of very difficult to believe that we're going to generate an inflation cycle out of those developments.
David, the heart of the matter is that we had a triple stimulus out of the pandemic. Let me a question that many people ask, is the American exceptionalism. Is the American boom and productivity nothing more than a follow on of a unique stimulus that austere Europe didn't do.
Well. You know, the the productivity side really comes from the supply side of the economy, not the demand side, So there was really nothing. I don't think that we can point to stimulus being the driver of productivity. Curiously enough, what COVID managed to do and that's the reason why productivity growth has been surprisingly strong. So we came out of COVID with a productivity shift to the upside. And the one sector actually that has led the growth in
productivity has not been technology or finance. It's actually been the retail sector. Because during the pandemic and the lockdowns and the aftermath, if you didn't digitize your business and follow the Amazon model as a retailer, you're going to go out of business. So even before what's happened on the AI side, which the markets certainly believe that this is going to be a productivity game changer, and it
probably will be. The post COVID environment and actually generated this sort of productivity improvements that Japell has been talking about. They're real. And then the question is going to be for the next five or ten years, what will this model shift from the inflection point on the technology curve into the productivity in the future. And I will actually tip my hat to the bulls who say that this is going to be a game changer. David.
The Federal Reserve appears to be focusing on the labor market. Here we got initial job as claims today a little bit higher than expectations. What's your view of the US labor market given that the Fed is really looking at it.
The way I would describe it is cooling but not contracting. Even if we get the consensus estimate of call it close to two hundred thousand tomorrow, you know, in the context of what happened in October, that leaves you with an average of about one hundred thousand. So the trend is cooling off. I expect that that will continue. And like most of the other parts of the economic pie, I mean, the incoming data, I've just been so confusing. I mean, you get the numbers from Jolts and they
show openings up but hirings down. You get the ADP number out, and the ADP showed that hiring amongst large businesses surged, but yet small companies, which are really in the weeds of the economy a lot more than big companies. Small companies on net have let people go in three
of the past four months. I read the bag Book yesterday, and you know, I'm shrugging my shoulders as to how J. Powell can talk about the economy being strong when the bag Book itself had about two hundred and fifty references to the economy either being slightly growing, modestly growing, or just outright week only twenty nine times was the word strong used in the Beige Book, and a fifty one page document to which I say, you know, mister Powell,
if you're going to spend all the time, resources and money on the Beige Book, why don't you at least listen to it. What was very striking in the Beige Book? And I would still say it's qualitative, it's not quantitative, but it's not revised. It just gets updated every six weeks. And I don't know if you guys went through it. I went through it tooth and nail because that's what I have to do. It's the most pleasurable reading in
the world. The labor market. I mean, there are elements that improved in the past six weeks overall economic activity yes, the consumer yes. But funny enough, the labor market was downgraded, and there were numerous comments on how wage growth is cooling. So how do you get wage growth cooling in the labor market that everybody thinks is tight or tightening. So again, we just are riddled with all these anomalies and inconsistencies.
But I would say that if you want to trend out the data, labor market not contracting yet, but it is cooling off.
David. One final question quickly here it is the Rosenberg bull market.
Can you buy? Can you own stacks?
Here? David Rosenberg?
Well, I'm having my own epiphany right now on this topic because, let's face it, it was the best year for the stock market since twenty nineteen. I'm not alone. I mean, the consensus at the end of last year for the end of this year for the S and P five hundred was forty nine hundred, and we've just blown through six thousand, and I think that there's a couple of things that are happening that should have you feeling bullish.
I'm still concerned over market positioning and sentiment is off the charts, and I am expecting in your term correction. The question is, which would be normal? Is what you do if we get the debt? And I think that you'd want to buy the debt. And I say that because you know, I've been calling this a bub for a while, but it's maybe a bubble if you look at trailing P multiples or one year four P multiples.
But if in fact we've had an inflection point on the technology curve, if we've had a model shift when it comes to what AI is going to deliver in terms of future profitability and productivity, I'm thinking that the market is sending you a message that it is taken that investors have basically lengthened their time horizons. So all the classic evaluation metrics that I've been using, I'm not going to say they're obsolete, but they're probably just not
relevant to today's backdrop. So I would say that, yeah, I guess if you can want to color me more probably more positive on the stock market on a secutor basis, based on everything that I've seen this year in particular, then yeah, I would say that, you know, expect the near term correction. I think it would be normal considering the nose levels rat However, I think it's a depth that you probably will want to buy.
We're out of time, but next time you're on, we want to talk to you about Canada as at fifty first State and I'll love to see how that goes. David Rosenberg's with Rosenberg at Research