Recession is coming, inflation will melt by 2023, why David Rosenberg says farmland is the asset to buy
David Rosenberg, Chief Economist and Founder of Rosenberg Research, predicts a recession this year. He is also optimistic that the Federal Reserve can fight inflation by 2023.
Rosenberg spoke with Michelle Makori, Editor-in-Chief and lead anchor at Kitco News, at the Vancouver Resource Investment Conference.
The Federal Reserve recently raised interest rates, and Fed Chairman Jerome Powell has heightened his hawkish rhetoric. Rosenberg said this is too little, too late. A “soft landing” is not possible, and the Fed may cause a recession.
“The only other time, historically, where the Fed started its tightening program this late in the cycle… was in 2000,” explained Rosenberg. “Guess what? [One] year later, a recession. And actually we had a… three-year 60 percent bear market on the S&P 500. So that’s where we’re at right now… [Look] the Fed is filled with human beings. You know, nobody’s perfect. They make mistakes.”
On economic growth, Rosenberg stressed that one does not need to go far to look for clues. Those clues point to a recession later this year.
“What’s the next shoe to drop, [it’s] going to be employment,” he said. “I’m starting to see some cracks… We actually lost 128,000 jobs in small businesses, and small businesses are in the weeds of the economy… small businesses tend to be a turning point indicator in the cycle…”
In a recent speech, Chairman Powell evoked memories of Paul Volcker.
Volcker, the Fed Chairman from 1979 to 1987, aggressively raised rates to reduce the U.S. economy’s high inflation.
Rosenberg remarked, “Of course, Powell’s comparing himself to Paul Volcker. Paul Volcker killed inflation how? Generating back-to-back recessions, go figure… So the bottom line is that yes, the Fed will crush inflation… and it’s going to be very painful.”
When asked how the housing market will fare, Rosenberg recalled the housing crash of 2008.
“We’re back to where we were in ’06 and ’07,” he said. “This bubble? No, it’s not going to be a financial calamity. I mean, the banks are far more capitalized… you’re going to have at least a 20 percent home price decline in the next couple of years.”
He said that farmland is a good investment in this environment. “Food, by the way, transcends the business cycle… So this is about buying farmland, tracts of farmland, in stable places around the world… And so the reality is it’s not a liquid investment… There are [however] open architecture mutual funds that are now starting to put agriculture funds as part of their offerings… agriculture is a bona fide secular tailwind coming out of the pandemic.”
Rosenberg suggested that as the Fed raises rates, deflation is a real risk. “If you told anybody in 1918, 1919, [with] war [and] Spanish Flu, that the next ten years is going to be… deflation, they would have locked you up… Guess what came out in the gurney? That’s my call. That’s why, by the way, I’m very bullish on long-term Treasury bonds.”
To find out Rosenberg’s outlook for gold and commodities, watch the above video.
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