David Rosenberg: Consumer Spending Is a Bubble Waiting to Burst… Morgan Stanley: Risk of a Global Recession Is ‘High and Rising’

Consumer spending is a bubble waiting to burst, market bear David Rosenberg warns

Wall Street is depending on strong consumer spending to help keep stocks afloat.

But Gluskin Sheff’s David Rosenberg warns the U.S. consumer is in a danger zone, suggesting a bubble is lurking.

“What no one seems to talk about is the underlying fundamentals behind the consumer are actually deteriorating before our very eyes,” the firm’s chief economist and strategist said Tuesday on CNBC’s “Futures Now. ”

Yet the latest economic data suggests the consumer, considered the main driver of the U.S. economy, is on solid ground. Commerce Department figures show retail sales in July rose 0.7%, after a 0.3% increase in June.

In a recent note, Rosenberg criticized the government’s retail report. He estimated the bullish retail sales number was completely financed by credit and, therefore, unsustainable.

“The pundits on bubblevision seem to make their living staring at the hood instead of checking out the engine … which is sputtering from a real income perspective,” he wrote. “Spending in the consumer space will converge in due time, don’t doubt that for a second.”

Morgan Stanley: Risk of a global recession is ‘high and rising’

  • Morgan Stanley warns clients in a note that the risk of a global recession is “high and rising” as trade headwinds aggravate economic slowdowns.
  • Despite claims that the U.S. remains insulated, the effects of the international slowdown are already filtering into American data, the bank writes.
  • “Even as we have been revising our growth projections lower, we continue to highlight that the risks remain decidedly skewed to the downside,” Morgan Stanley’s chief economist, Chetan Ahya, writes.

Doubleline’s Jeffrey Gundlach Says Federal Reserve Has Lost Control

The Fed has lost control of interest rates as evidenced by the federal funds rate trading higher than any part of the U.S. Treasury yield curve, Jeffrey Gundlach, the chief executive of DoubleLine Capital, said on Tuesday.

 

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