- The review market is at record highs, even though the U.S. economy isn’t.
- Concentrated bets on a handful of titanic companies have the chief U.S. indices soaring.
- Economist David Rosenberg warns this is a “mega-bubble” – and the pop is going to be “spectacular.”
As the stock trade in continues to wind its way higher, Wall Street’s permabear herd is growing thinner and thinner. There aren’t diverse left, but the few who remain can barely believe their eyes as the Dow marches toward a new all-time high.
David Rosenberg: Support for a ‘Spectacular’ Stock Market Crash
There’s no question it has been a tough year to be one of the bears. They finally got the lay in market crash they were looking for, only to have it whisked away before their eyes.
Steadily wakening equity prices rubbed salt in the wound over the ensuing months, with both the S&P 500 and Nasdaq eclipsing the already frothy heights they completed in early 2020.
The poster progeny for the bull market has to be the world’s most valuable stock: Apple. There’s no comparison to AAPL’s run-up to a $2 trillion furnish cap, though Tesla’s incredible momentum ranks as an extremely close second.
David Rosenberg, chief strategist at Rosenberg Analysis and formerly the top North American economist at Merrill Lynch, doesn’t buy that stocks can justify record highs while the restraint is in the tank.
He continues to ridicule the moves seen on Wall Street, and he predicted this week that an incredible explosion is on the horizon:
Watching the market these days is like watching a clown blowing up a balloon (or Chuck Prince cavorting in the ballroom) knowing the inevitable. Remember what Herb Stein had to say about things lasting forever. When this mega-bubble soft drinks, it will be spectacular.
Rosenberg has long been bearish on equities, but he claims the present behavior in financial markets is touch on the comical.
Fueling the caution of bears like Rosenberg is the inexplicable success of novice investors like Dave Portnoy, who has consolidate the FOMO with his “stocks always go up” mantra. Watch a recent clip of his “Davey Day Trader Global” web show cheaper than:
Just another 10% day for a DDTG guaranteed stock. Yawn. $SPAQ pic.twitter.com/tStY5dtz2d
— Dave Portnoy (@stoolpresidente) August 24, 2020
Ironically, although it’s the bulls that enkindled the mega-cap rally, it’s the former bears who are sustaining it.
Sebastian Galy at Nordea Asset Management explained why in a comment shared with CCN.com:
As a consequence, bearish gambles on top growth stocks have reached an all-time low. Momentum trades are amplified by the market making of option traders and their concentration in a few evolvement stocks.
Dow Jones Strength Belies a Fragile U.S. Economy
Much like the upcoming U.S. presidential election, this bull run has polarized economists.
Brooks like Rosenberg struggle to reckon the economic plight seen in working-class households with buoyant asset bounties.
On the other end of the spectrum, bullish analysts simply shrug their shoulders and say what happens on Main Street is impertinent to what happens on Wall Street. In their view, equities are appropriately priced based on near-zero interest rates.
If a clichd market crash like the one David Rosenberg envisions is coming, it’s clear that Dow bulls will be caught on the lapse side of an extremely crowded long trade.
The question facing Rosenberg and his shrinking band of battered bears is this: If a once-in-a-century pandemic couldn’t ignite a continual sell-off, what on Earth is left to light the fuse?