Veteran Bay Street economist David Rosenberg isn’t convinced the deluge in fiscal stimulus aimed at guiding the global economy through the COVID-19 crisis will lead to higher inflation in the long term.
Rosenberg, chief economist and strategist at Rosenberg Research and Associates, said in an interview Friday that it could fuel some near-term volatility, but ultimately inflation fears will prove to be a blip on the radar.
“Everything we’re seeing right now is transitory, it’s not permanent… I don’t see inflation being a permanent problem. It could be temporary problem, not a permanent problem. What people aren’t factoring in is that everything we’re seeing right now is temporary, and even the increase in inflation is temporary.” he said.
“I’m actually looking at this increase in bond yields, the sell-off in the Treasury market, as being a very attractive opportunity to get back in.”
Rosenberg said market participants need to recognize the current U.S. stimulus program isn’t cut from the same cloth as previous American efforts to boost economic growth due to its temporary nature.
“All this fiscal stimulus that everyone’s talking about, this is not like FDR’s New-Deal stimulus over a five-year period of capital projects. This is not permanent tax cuts by Ronald Reagan, or George W. Bush, or Donald Trump, or even say the 10-year infrastructure program that Obama brought in back in 2009,” he said. “This is all temporary and this is all going to come out.”
While most economic projections are forecasting a strong rebound in 2021 as vaccines are administered and more jurisdictions open their economies back up, Rosenberg said investors should look through the transitory noise and assess what conditions will look like after the world returns to a more normal state.
“Vitality in the U.S. economy is vaccines and policy stimulus. For this year, it’s going to be a very strong year for the economy,” he said.
“We have to start looking at 2022. At some point the markets are going to be forced to confront 2022.”
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