Knock-On Effects Could Make This Worse Than The Dot-Com Bust | David Rosenberg

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**David Rosenberg** (1:00)
My big concern is that there's going to be all sorts of knock on effects that could make this actually worse than what we saw in the early 2000s. Because everything outside of health care and consumer staples, all these other sectors are correlated with that one trade.
So where are you going to hide?

**Adam Taggart** (1:28)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host. Welcoming you for a very exciting discussion with one of the best highly respected economists and award-winning market researchers. I'm talking, of course, about David Rosenberg. David has been really at the top of the list since his days in Merrill Lynch, but that's obviously continued on in his firm Rosenberg Research that he's been running for many, many years.
We're going to talk with David about his overall macro and market outlook, because it's been a while since he's been on the channel. But then he's also going to tell us about a new fund that he is launching. And I'll leave all the details of that to David. David, thanks so much for joining us today.

**David Rosenberg** (2:12)
Great to be back on with you, Adam.

**Adam Taggart** (2:14)
All right. So I asked my audience for which questions they'd like to hear you most address. And of course, I got hundreds.
So I'll try to sift the best of them. But if we can, let's just start. It's a question I haven't actually asked on this channel in a while. But since it's been a while since you've been on David, and so much has changed in the first half of this year, what's your general assessment right now of the economy and the financial markets?

**David Rosenberg** (2:40)
Okay. Well, as far as the economy is concerned, I have a completely different view than what Kevin Morse dished out to us at Jackson Hole last week.
I don't see the economy as being resilient or solid or healthy.
I am seeing that we are in the midst of what I would term a growth turn down, that we have moved out of what was once a 3% growth economy to something closer to 2 And now I believe that once we get the third quarter numbers, we're going to have a four quarter trailing trend in real GDP of 1.5%.
Now, that's not a recession, but I could tell you that when I started in the business in the mid 1980s as a desk economist on a trading floor, when you got to a one handle on GDP growth, people would be asking me what comes next? Are we heading into a recession? So growth is slowing. I don't see the case for re-acceleration, especially because a lot of the fiscal props behind the economy are now in the rear view mirror.
And when I'm taking a look at the breadth, you know, it's interesting that Kevin Warsh likes to talk about the breadth of inflation and the percent that's above 3%. But when you take a look at the growth of real GDP and you strip it out, it's really a two pronged source of support. There's more fragility beneath the veneer that I think is commonly believed. You have the AI data center construction boom, and that's providing about half the growth in the economy. And then the other half is the equity wealth effect on spending, especially at the high end. And you can see that in the precipitous decline in the past year and the personal savings rate.
If consumer spending in real terms had actually matched what disposable income has done, there would be no growth in consumer spending in the past year. But because of the fact that people feel wealthier and are spending money, not against income, but against their 401Ks, consumer spending is growing a bit above 2%. But it would be zero if people were just compelled to spend against their incomes. And I think that's worth noting because it talks to the quality of whatever growth we have in the economy. Bottom line is that absent the equity wealth effect on spending, especially in the high end, and absent this AI spending boom, which has actually zapped a lot of vitality out of the rest of the economy. You know, I think that in his Jackson Hole, Warsh mentioned the AI boom eight times. And he mentioned housing just once, as if housing doesn't matter or the rest of the economy doesn't matter. But you know, the other half of business spending that is not tech related is actually flat year over year, even as tech spending in real terms is up 16 percent. So I just mentioned that because in my professional life, it's 40 years, I don't remember a time when I've seen so many extremes and imbalances and divergences, not just in the data, but also in the markets. And we've talked about that before.