MacroVoices #352 David Rosenberg: This Bear Market Has A Long Way To Go

Episode Summary

Executive Summary: Episode 352 centers on David Rosenberg’s bearish macro call: he argues the equity bear market is not over, recession is still ahead, and a true bottom likely comes only after the Fed has paused and later cut rates into a steeper yield curve. He sees inflation peaking and rolling over, prefers gold over crypto as a hedge, and views deglobalization/geopolitics as longer-term commodity-supportive but not enough to derail disinflation.

Main Topics: Bear market remains incomplete (Priority: 5/5): Rosenberg says recent equity strength is another tradable bear-market rally, not a durable bottom, because recession has not fully arrived and the Fed is still tightening into an inverted curve. Fed policy, pivot timing, and the yield curve (Priority: 5/5): A real market bottom requires the Fed to stop hiking, then cut rates enough to re-steepen the yield curve; slowing hikes is not a pivot and the pause-to-bottom lag can be long. Inflation is peaking and likely to roll over (Priority: 5/5): Rosenberg argues inflation has peaked, with goods deflation, commodity weakness, easing rents, contracting money supply, and a worsening labor market pointing lower over the next 12-24 months. Gold versus the U.S. dollar and crypto (Priority: 4/5): He is bullish gold as a geopolitical and currency hedge, expects the dollar to have topped, and believes crypto’s rise had siphoned demand away from gold. Crude oil, OPEC+, China reopening, and backwardation collapse (Priority: 4/5): Eric’s opening macro view is that crude is at a key inflection point: inventories are extremely low, but the collapse in backwardation and weak tape action suggest demand fears and/or impending supply changes may be dominating. Geopolitics, deglobalization, and commodities (Priority: 3/5): Rosenberg says the Russia-Ukraine war signals a more fractured world order, with U.S.-China rivalry, supply chain reshoring, and geopolitical tension likely keeping a floor under commodity prices. Equity hedging and options strategy (Priority: 4/5): In the post-game, the hosts discuss practical downside protection using SPX put spreads, call-financed structures, and other low-cost hedges amid low volatility and uncertain short-term market direction.

Key Arguments: The equity lows are unlikely to be in while the Fed is still raising rates into an inverted yield curve; history says durable bottoms come later in the recession and after easing begins. A pause is not the same as a pivot; the meaningful pivot is when the Fed actually starts cutting enough to steepen the curve. Inflation has likely peaked, and goods disinflation plus weaker money growth and labor-market deterioration should pull CPI lower over time. Gold is attractive because the U.S. dollar appears extended and crypto is no longer offering the same speculative alternative role. Geopolitical fragmentation and onshoring may raise the global cost base over time, but the effect is gradual rather than an immediate inflation shock. Crude oil remains complicated: inventories are at generational lows, yet the collapse in backwardation is a major bearish warning signal. The market is likely to keep oscillating with bear-market rallies until recession and policy tightening are clearly priced in.

Data Points: Episode: 352 - Macro Voices episode number Production date: December 1, 2022 - Episode release date WTI inventory draw: 12.6 million barrels - EIA reported weekly U.S. crude drawdown Consensus expectation for crude draw: 2.5 million barrels - Market expectation before EIA release Strategic Petroleum Reserve draw: 1.4 million barrels - Additional supply drawn from SPR that week Cushing crude draw: 415,000 barrels - Weekly draw at Cushing, Oklahoma Gasoline build: 2.8 million barrels - EIA products data Distillates build: 3.5 million barrels - EIA products data U.S. crude production: 12.1 million barrels/day - Unchanged weekly U.S. production figure WTI level mentioned: $81.27 - Front-month WTI around 13-day moving average / 38.2% retracement SPX implied move (Dec 16 OPEX): about 150 points - Options-implied near-term range discussed in post-game SPX upside target: 4,230 - Implied move range around December options expiry SPX downside target: 3,930 - Implied move range around December options expiry SPX resistance: 4,120 - Gap fill / heavy resistance area in chart discussion SPX support: 3,850 - Support area cited in chart discussion QQQ upside projected: 308 - NASDAQ implied range for Dec. 16 OPEX QQQ downside projected: 280 - NASDAQ implied range for Dec. 16 OPEX VIX support level: 20 - VIX approached key support in post-game Dollar consolidation range: 105.5 to 107.5 - DXY trading range discussed by Eric Gold retest level: 1,720 - 100-day moving average cited as prior add-to-longs level Gold rally from CPI miss: about $170 - Post-CPI rally discussed in the post-game S&P downside scenario from Patrick: 3,200 to 3,000 - Potential next-leg bear market target under recession scenario Credit spreads in junk bonds: about 6% - Current widening level discussed as not yet a true stress signal Typical stress level in junk spreads: 9% to 10% - Level often associated with real corporate credit stress Fed unemployment projection: 4.4% - Fed’s September forecast referenced by Rosenberg Current unemployment trough: 3.5% - Recent low cited by Rosenberg Possible unemployment view: closer to 6% - Rosenberg’s expectation for labor-market deterioration Dollar peak move: about 15% year-over-year - Described as an unusually strong annual rise in the U.S. dollar Backwardation / contango: first two WTI monthly time spreads in contango - Eric’s key bearish signal in crude Balanced hedge example: SPX put spread with ~$580 net cost - Options strategy example discussed in post-game Put spread payoff example: roughly $29,500 upside for about $500 risk - Illustrative hedge payoff described by Nick

Pivotal Quotes: "we've had a few bear market rallies this year" — David Rosenberg: His core view that the current equity rally is not the start of a new bull market "You need the Fed to cut rates sufficiently to re-steepen the yield curve" — David Rosenberg: He explains the condition required for a durable market bottom "inflation has peaked and it is rolling over" — David Rosenberg: His view on the inflation outlook over the next 12-24 months

Implications: Listeners should treat the current equity rally as potentially fragile, focus on recession and Fed-lag risks, and consider disciplined hedges. Rosenberg’s framework favors patience, lower inflation ahead, a weaker dollar, and selective strength in gold and commodities.