Market's 'Serious Mistake': David Rosenberg's Urgent Warning For What's Coming

Watch on YouTube ↗  |  May 13, 2025 at 23:36  |  46:27  |  The David Lin Report
Speakers
David Rosenberg — President, Rosenberg Research

Summary

David Rosenberg argues the US-China tariff reprieve is only a temporary less-bad development and that recession remains his base case for the second half of 2025. He cites weakening labor-market internals, negative leading indicators, tight real Fed policy, fading fiscal stimulus, and a still-elevated effective tariff rate. He recommends a defensive allocation: Treasuries, cash/T-bills, gold and gold miners, low-beta dividend/bond-proxy equities, Europe, aerospace/defense, and long euro/yen versus a weaker dollar. He is cautious on US equities and cyclical assets, viewing the recent rally as a short squeeze rather than sustainable.

  • Rosenberg says markets overreacted to the US-China tariff reprieve and the trade war is not over.
  • He expects a US recession in the second half of 2025 due to weak labor internals, negative LEI, tight Fed policy, no fiscal stimulus, and tariffs.
  • He sees the Fed eventually cutting rates, which should support Treasuries and lower yields.
  • He forecasts a weaker US dollar and stronger euro and Japanese yen.
  • He views the US equity rally as a short squeeze and fund-flow move that is not sustainable.
  • He recommends defensive assets including cash/T-bills, Treasuries, gold, and gold miners.
  • Within equities, he favors low-beta dividend/bond proxies, Europe, and aerospace/defense while avoiding cyclicals.
Ideas
David Rosenberg President, Rosenberg Research 23:22
Long Treasuries as Fed cuts.
Rosenberg expects a second-half recession to force the Fed to cut rates, similar to 2019. He argues most of the rise in yields has been term premium and policy/trade/fiscal uncertainty rather than inflation or growth, so if term premium compresses the 10-year Treasury yield can fall to 3.75% and then 3-3.5% over the next 12 months. He says the maligned Treasury market should deliver equity-like returns.
TLT 10-Year Treasury Notes HIGH
David Rosenberg President, Rosenberg Research 37:40
Short dollar, long euro, yen.
Rosenberg sees a weaker US dollar, forecasting DXY to new cycle lows by year-end. He expects the euro to strengthen because of Europe's German-led fiscal bazooka and better European growth, and he calls the Japanese yen extremely cheap because BOJ policy is too easy relative to the economy and inflation, implying BOJ tightening and yen appreciation.
FXE FXY HIGH
David Rosenberg President, Rosenberg Research 37:40
Short dollar, long euro, yen.
Rosenberg sees a weaker US dollar, forecasting DXY to new cycle lows by year-end. He expects the euro to strengthen because of Europe's German-led fiscal bazooka and better European growth, and he calls the Japanese yen extremely cheap because BOJ policy is too easy relative to the economy and inflation, implying BOJ tightening and yen appreciation.
DXY HIGH
David Rosenberg President, Rosenberg Research 39:13
US equity rally unsustainable, avoid.
Rosenberg views the recent US equity rally as a short squeeze and fund-flow/benchmark-chasing move rather than a sustainable recovery. He says nothing is priced for the recession he expects, S&P 500 earnings yield is only around 4.8% versus roughly 4.4-4.5% in the 10-year and cash, so chasing the market is a trade at best and not prudent risk management.
SPY HIGH
David Rosenberg President, Rosenberg Research 39:46
Avoid cyclical equities into recession.
Rosenberg recommends reducing portfolio cyclicality and beta into the expected recession, saying he is not bullish on anything tied to the cyclical part of the economy. A still-elevated effective tariff rate and weaker hard data should hit cyclical assets especially hard in the second half.
Cyclical equities HIGH
David Rosenberg President, Rosenberg Research 40:46
Hold T-bills for defense.
Rosenberg would hold cash/T-bills yielding about 4.4% as a defensive allocation while policy and economic uncertainty are high and recession risk is elevated, preserving capital and liquidity.
BIL MED
David Rosenberg President, Rosenberg Research 40:49
Own gold and gold miners.
Rosenberg recommends gold and gold miners as defensive stores of value amid recession risk, policy uncertainty, and a weakening US dollar; he explicitly says he is bullish on gold and would own miners.
GLD GDX HIGH
David Rosenberg President, Rosenberg Research 40:53
Own low-beta dividend bond proxies.
Within equities, Rosenberg favors low-beta 'bonds in drag' sectors with stable industries, solid dividend payout ratios, and decent yields. He specifically likes utilities, says he likes some financials and telecom providers, and wants the portfolio's beta and running yield managed for downside protection.
SPLV UTILITIES HIGH
David Rosenberg President, Rosenberg Research 41:54
Europe outperforms on fiscal visibility.
Rosenberg prefers regions with fiscal visibility and expects Europe to outperform the US economy because of the German-led European fiscal expansion, which also supports a stronger euro. He recommends going to areas of the world with visibility, specifically Europe.
VGK HIGH
David Rosenberg President, Rosenberg Research 42:08
Aerospace defense has fiscal visibility.
Rosenberg especially likes the aerospace and defense industry because government fiscal spending is flowing there, giving the sector earnings visibility now and in the future.
ITA HIGH
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This The David Lin Report video, published May 13, 2025, features David Rosenberg discussing TLT, 10-Year Treasury Notes, FXE, FXY, DXY, SPY, Cyclical equities, BIL, GLD, GDX, SPLV, UTILITIES, VGK, ITA. 10 trade ideas extracted by AI with direction and confidence scoring.

Speakers: David Rosenberg  · Tickers: TLT, 10-Year Treasury Notes, FXE, FXY, DXY, SPY, Cyclical equities, BIL, GLD, GDX, SPLV, UTILITIES, VGK, ITA