By Ketki Saxena
Investing.com -- As per prominent Bay Street economist David Rosenberg, “2023 is going to be a very rough year” for the Canadian economy.
Rosenberg believes “We have an economic storm brewing” as central banks “Including the bank of Canada tightening aggressively into a bear market in equities and into an inverted yield curve.”
In a TV Interview to BNN Bloomberg, Rosenberg also points to the Canadian economy’s “double negative barrelled outlook” as it remains sensitive to domestic monetary policy as well as what happens in the US. Rosenberg cites the negative impact of Canadian exports driven by the slowdown in the US.
Rosenberg believes the currently robust job numbers will be “decelerating markedly over the next several months”, and points to the current deflation in asset prices, including equities and Canadian home prices, as signs of an accelerating downturn.
Rosenberg is also calling for a 30% peak-to-trough downturn in Canadian housing prices, which he believes “is likely to precipitate a slippery slope of declining consumer confidence and spending and prolongs the extent of the economic downturn.”
Apart from the impact the housing price declines will have on consumer confidence, perceived wealth, and spending, he also points out the sizable “impact on the financial sector and banks, considering how big mortgages are on bank balance sheets”
Rosenberg also points to declining commodity prices as another factor that will affect earnings in the last quarter, noting that, “Commodity prices, by and large, have been in a bear market in the last several months and that's going to feed right into corporate profitability.”
Despite easing corporate profits and a 15% decline on the Canadian index so far this year (and Wall Street in a bear market), Rosenberg does not believe this is the bottom for stocks. He notes that Historically the stock market bottoms 16 months after the pause” in Fed rate hikes.