Rosenberg on Heightened Political Risks, US Economic Downturn

Jon Economy, Fiscal Policies, Market Commentary

While some economic data has improved this year, David Rosenberg of Gluskin Sheff questions the likelihood of a sustained cyclical upturn and cites specific political risks in the weeks and months ahead, which could rattle the markets.
Recession Isn’t Imminent, But Growth Is Weak
In a recent interview with FS Insider, Rosenberg said there’s nothing in the tea leaves to suggest a recession is imminent, but with growth being so weak, some sort of shock could trigger a recession.
This could take the form of a negative shock from abroad, such as a hard Brexit, or fragility beneath China’s GDP numbers becoming apparent. Both could affect US exports. Alternatively, Rosenberg stated, it’s possible the Fed makes a policy mistake, upsetting markets in the process.
‘The reality is that we don’t have an economy right now with a big growth cushion like we’ve had in the past,’ Rosenberg said.
He sees the underlying trend in the US economy around 1 to 1.5 percent GDP growth, well below previous growth cushions.

This post was published at FinancialSense on 10/31/2016.