Longtime market bear David Rosenberg is warning investors that the stock market and bitcoin are massive bubbles.
The economist and strategist cites cluttered trades in an economic context in difficulty for his concerns.
“Based on our [stock market] valuation work, we’re 20% to 30% overvalued based on a whole bunch of different metrics, ”the president of Rosenberg Research told CNBC’s“ Trading Nation ”last week.
Rosenberg, who was Merrill Lynch’s senior North American economist from 2002 to 2009, is known for his pessimism in recent years. In 2019, he told investors that a recession was all but inevitable.
He toned down his market negativity last spring on “Trading Nation” – saying he didn’t hate stocks because the Federal Reserve’s unprecedented support could last for years. The key right now, according to Rosenberg, is to be vigilant.
‘Probably won’t erupt anytime soon’
“What keeps the boot together is essentially zero interest rates. As long as rates stay where they are, unless we have a real dramatic setback in economic activity, this bubble we’re in won’t probably not going to break out anytime soon, “he said. “We have to understand that we are investing in a bubble.”
The main indices start 2021 in record territory. The S&P 500 and Dow closed on Thursday at all-time highs, jumping 16.3% and 7.3% respectively over the past year. The Nasdaq, the Nasdaq, missed a new record by a hair’s breadth, but had its best year since 2009 – up almost 44%.
Rosenberg is also avoiding bitcoin, which has also just finished a monster race. It broke $ 30,000 for the first time over the weekend and closed 2020 at record levels. The cryptocurrency has jumped 305% this year, for its best annual performance since 2017.
“The parabolic movement of bitcoin in such a short time, I would say for all safety, is very abnormal,” said Rosenberg, who sees it as the biggest bubble in the market right now.
For the next 12 months, Rosenberg plans to avoid last year’s winners. Its main strategy includes utilities and lagging energy.
“What I want to do in the context of this hot stock market is invest in areas that are not hot and have great potential for catching up,” he said. “They exist.”
But there is one exception: gold, which just finished its best year in a decade. Rosenberg considers it a safe haven.
“It has 1/5 the volatility of bitcoin,” Rosenberg said. “I have been very bullish on gold and remain bullish on gold.”
The precious metal ended the year at $ 1,895.10 an ounce, a fraction of a percent below historic highs.
Disclosure: David Rosenberg is in the process of buying SPX Puts. It owns energy and pipelines (utilities) and gold.