Several years ago, Gluskin Sheff’s superstar economist (previously at Merrill), David Rosenberg (in)famously flipped from bear to bull, predicting what amounts to a victory for the Fed: a jump in (wage) inflation, a burst in economic growth, and an overall selloff in that most deflation-dependent asset, the US Treasury. None of those happened, and while we (gently) mocked Rosie’s transformation at the time, recently Rosenberg himself admitted that our skepticism was accurate, when he reverted to his bearish bias over the past year, predicting that deflation would end up winning after all.
Today, in his latest market musings chartpack, we present the key reasons why Rosenberg has never been more convinced that all those calling for an end to the secular bond bull market, are wrong and why despite the Fed’s best intentions to create the impression that the global economy is stabilizing, what is about to be unleashed on the global economy is at least 5 years of accelerating deflationary pressures.
As the main catalysts for his gloomy outlook, Rosenberg lists the obvious ones, debt and deflation, but by far the most important factor that prompted Rosenberg to revert to the “dark side”, the one about which Rosie says “nothing is more important than this if you are looking at what will fundamentally influence the financial markets for the next decade-plus”… is demographics.
“The first of the boomers turned 70 this past year, that 80 million proverbial pig-in-the-python in North America, and 1.5 million will be doing so each year for the next fifteen years.”
That fact, Rosenberg believes, will be the single most important driver of returns over the next decade.
Below, he explains why those seeking to understand market moves and inflationary forces over the coming ten years, should first and foremost focus on demographics. Everything else will follow.
This post was published at Zero Hedge on Jul 22, 2017.