How Long Can You Hold Your Breathe?

I recently listened to a video on YouTube that gave some very interesting perspectives on the markets.

It’s a dangerous thing trying to get opinions on YouTube because you will get every opinion under the sun, but I thought this was worth sharing.

In this interview Raoul Pal and David Rosenberg had some good points.

If you don’t have time to watch the whole thing here are a few highlights.

David Rosenberg founded Rosenberg Research in January 2020 after an illustrious, three-decade career on Wall Street and Bay Street as an economist and market strategist.

He said to get out of recession you need a catalyst.

The catalyst are usually either Monetary policy, (printing Money) or Fiscal policy (Interest rates). The Fed is still tightening interest rates to try and crush inflation. So they aren’t lowering interest rates to turn the recession around.

They’ve already pumped so much money (monetary policy) into the system, that has caused the inflation to begin with, so that won’t solve the problem.

So a recession could be here for 2 years or more.

When you get a plain vanilla liquidity correction (not recessionary) you retrace 40% of the prior bull market condition, which results in a 20% draw down…

A recessionary bear market is different than a liquidity correction, corporate America takes a crushing 20% hit to earnings this kills their bottom line and their stock prices…that’s why in recessionary bear markets you reverse 83.5% of the prior bull market condition, this would take the S&P to 2700 as the bottom.

That’s another 32% drop from where we are now…and a total of 56% from the high.