Investment guru David Rosenberg warns savvy investors that the record-setting bull stock-market run may not last much longer.
"Keep in context how weird it is to have the longest bull market in equities in the context of the weakest economic expansion of all time, and how do you square that circle?" he asked Wednesday on CNBC.
"It's because of the long arm of the central banks," the Gluskin Sheff chief economist said. He blamed the record run's "artificial support," citing the boost stock and credit markets have been receiving from central banks around the world. But now, he predicts it could all come crumbling down as easy money policies fade, CNBC explained.
"The big risk is in the corporate bond market," he said. "We're going to have a severe tightening in financial conditions, and that's going to reverberate back into most risk assets including equities."
"We'll probably start to see earnings estimates come down and more earnings disappointments than we've seen over the course of the last several years," Rosenberg said.
Meanwhile, President Donald Trump said he doesn’t see a reason for Congress to impeach him but that the stock market would plummet and Americans would be poorer if lawmakers did so.
"I don’t know how you can impeach somebody who’s done a great job," Trump said in a wide-ranging interview with Fox News broadcast Thursday.
"I’ll tell you what, if I ever got impeached, I think the market would crash,” Trump added. “I think everybody would be very poor. Because without this thinking you would see numbers that you wouldn’t believe, in reverse."
Trump’s remarks built on his history of defying presidential traditions by commenting extensively on the stock market. U.S. equities are in the middle of the longest bull market ever, buoyed in part by his tax cut but predating him by years and undergirded by corporate earnings and low interest rates.
To be sure, world stocks came under pressure on Thursday as new tariffs took effect in the U.S./China trade war and markets speculated about Trump’s position following legal rulings against two former advisers.
Stocks were subdued as the U.S. and China, despite ongoing talks, implemented 25 percent tariffs on $16 billion worth of each other’s goods.
The world’s two biggest economic powers have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to risks to global economic growth.
While investors are looking ahead to see how increasing trade barriers between China and the United States might affect corporate earnings, political turmoil also weighed.
Trump’s former lawyer Michael Cohen pleaded guilty to campaign finance violations on Tuesday and former campaign manager, Paul Manafort, was found guilty on charges of tax and bank fraud.
Investors are considering whether the twin setback will hurt the president and his Republican Party’s prospects in mid-term elections.
That weighed on Wall Street overnight and the market ended mixed despite the S&P500 clocking its longest bull run in history.
“While the (legal issues) shouldn’t substantially alter the stock market landscape, money managers and analysts say the developments raise the likelihood of further turbulence ahead for Mr. Trump heading into the mid-term elections,” said James McGlew, Perth-based analyst at stockbroking firm Argonaut.
Material from Bloomberg and Reuters were used in this report.
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