Blowout GDP Report Is 'Manipulated', 2026 Economy Reaches Breaking Point | David Rosenberg
Summary
Macro View: Rosenberg argues headline GDP is overstated, with consumption juiced by savings drawdowns and a weakening labor market pointing toward recession risk.
Precious Metals: Bullish on gold, silver, and miners, citing ongoing central bank buying and favorable performance versus other assets.
Aerospace & Defense: Positions as a buy-and-hold driven by rising global military spending and geopolitics, also serving as a tech proxy with cyber exposure.
Utilities: Favored as hard-asset, income-generating plays with bond-like characteristics and potential growth, supporting a defensive, yield-focused allocation.
Fixed Income: Positive on US Bonds and UK Gilts as inflation cools and yields remain among the highest in the G10.
Market Outlook: Sees tight linkage between equities and GDP; warns a stock market stumble would significantly hit growth amid deteriorating hiring trends.
Opportunities: Emphasizes thematic, low-beta, high Sharpe, income-oriented assets over passive indices for the coming year.
Risks: Highlights precarious employment trends, over-optimistic earnings consensus, and the danger of relying on wealth effects to sustain consumption.
Transcript
I mean the low end and now the middle end consumer is in a recession. Housing is in a recession. Old economy capital spending is in a recession. Non-resident construction is in a recession. You have white swas of the economy, but it's being offset by what's happening with AI. They they've already rolled over. So people to talk to me about 4.3%. >> Yeah. >> 4.3%. I mean it makes it it really makes no sense. >> A bombshell GDP report was released this week. We're going to find out what this means, why it's important, and what's ahead for 2026. This video is sponsored by Koshi. It's a fully regulated platform that lets you trade on real world events from economic data to political outcomes. Traders can put money down on their favorite teams, events, elections, and more in all 50 states, including California and Texas and over 140 countries. Go to Koshi and use the code lyn l i n link down below or scan the QR code here and new users will get $10 off on their first $100 deposit. Our next guest is David Rosenberg, uh, president of Rosenberg Research and he's going to give us a breakdown for 2026. And we're going to find out from him whether or not 2026 is going to be as Rosie as David's nickname, Rosie. Welcome back to the show, David. Good to see you. >> Thanks, uh, David. Great to be on again. Let's take a look at by the way people can check out our last discussion with David link down below where we had a panel uh bull and bear debate with uh Edardenni very good uh discussion here uh let's start with today's GDP numbers US economy expanded fastest paced in 2 years so initial reading of third quarter GDP uh showed us economy expanded at an inflation adjusted annualized rate of 4.3% a far faster pace than 3.8% 8% recorded in the prior quarter. You tweeted though uh this is kind of smoke and mirrors. If you think the CPI data was manipulated, so was today's GDP report. Strip out governments sliding imports in the sharp draw down in the personal savings rate in support of consumption. And guess what? Real GDP was actually 0.8% in Q3, nowhere near the 4.8 uh 4.3% of Fugazi, if there ever was one. Uh tell us about what you mean by this. Why are we stripping those items out in particular? Well, it's just to um basically isolate uh what were the idiosyncratic factors behind that 4.3. Uh so for example uh arithmetically when imports go down uh the subtraction is actually a net contribution to GDP. So that was one factor. Uh you know government uh is government. um you know I don't know what multiple an equity market investor would put on the fact that government spending uh was a feature uh in the report uh and then you have the situation where as you had mentioned earlier the the high-end consumer continues to blaze the trail uh for the overall household sector. Um so what we had was really an epic uh decline in the personal savings rate. You know, you you talk to a non-economist about the savings rate and uh people just roll their eyes uh and they freeze. But it's the most important behavioral aggregate in the national accounts that uh decision at the margin as to how much money you're going to save or spend out of your uh current income. So, the savings rate went from 5% uh to 4.2%. Uh an 8/10 decline in a quarter is a really big deal. It's um and it's the lowest level we've had since uh well in basically over 3 years. So um what that's telling you is that I'm not going to say necessarily artificial growth in consumer spending. It just wasn't based on organic income. It was basically people especially the high end running down their savings rate um because they feel comfortable with their nest egg rising as much as it's been uh with the stock market. Um so my major point was that when you adjust the number for the drop in the savings rate uh which is sort of like a juicing up of the data because it wasn't based out of income uh the government and then the arithmetic contribution from declining imports um and of course the trade data have been all over the place this year because of the tariff file. Well, basically, you're talking about real GDP growth running below 1%. In other words, it was a lopsided report. Uh, I think you want to take a look not just at the headline, but what were the drivers and just the decline in the savings rate alone contributed 60% of the growth to the overall economy. That's how powerful that was. And the major point I'm going to make, David, is, you know, you um, you know, you bring up the point that the US economy is booming. 4.3% real GDP growth. >> But that's because we're so narcissistic that we measure economic success in terms of spending. Um you can draw down your savings rate because you're feeling more confident. Sure, you can borrow money with your credit card spend. But the question that should we should really ask is, you know, what was what do the income numbers look like? What did income look like? and real disposable income growth uh was basically flat for the second quarter in a row. There's no growth in the past 6 months in real after tax personal income. And yet we have this booming consumer on our hands. And and that's a dichotomy I think that we have to pay attention to because it tells me this the stock market and the economy are so tightly wound up with each other uh that what's driving the economy now it used to be when I started on the business in the mid1 1980s people on the trading desk would say what's the economy going to do so they could make a view on what the stock market was going to do but now it's basically the economist goes to the equity strategist and says, "What's your stock market call?" Cuz I got to put that into my GDP model. >> Wow. >> So, you got this stock market strength that's driving the savings rate down, especially in the high-end consumer that's carrying all the load. And that to me is one of the big factors uh in the data today that even if you don't want to use imports or government, well, you'll say, "Well, government's part of the economy. Why wouldn't you include that?" Okay, sure. But it's the nature of this consumer boom that basically we have consumers spending money with income growth flat. How sustainable is that model? It's going to last as long as the bull market and equities. So if you're going to ask me my outlook on 2026 for the economy, tell me what the stock market's going to do. And I'll just tell you that the stock market continues to go up, that savings rate goes down, and it's going to be all rosy posy. You use the word rosy. But this is a it's not your classical model where incomes are driving consumer spending. If consumers in the third quarter were forced to spend their income and nothing else, if they were constrained by their income growth, then the consumer spending segment, which was way above expected, it was 3.5% at an annual rate. But if they were forced, the consumer was forced to spend in line with their incomes. David, the consumer would have been flat last quarter and we'd be talking about a completely different narrative. >> So, can we make the I guess judgment that because the Fed is going to continue cutting into the new year. They've already embarked on what people call QE. So, that's going to continue driving asset prices up and the consumer that you're talking about, this consumer boom will continue. That's going to drive growth. >> No, I'm not saying that. I'm [clears throat] saying that we have a a 95% correlation between GDP and S&P and that the the stock market has never before in our lives been such a principal determinant of where the economy is going. So if the stock market stumbles through it whatever reason or just stops going up, it's going to have a big impact on GDP growth no matter what the labor market is doing. I mean, can we really look like the the other part of this, let me just say, by the way, I guess we could debate whether it's uh QE or not QE, what the Fed is doing, the Fed will tell you that's not classic quantitative easing. Uh because it's not intended to juice animal spirits. And you'll say, well, that's the net result. But the the thing I would ask you is this is they're buying Treasury bills, right? They're buying like $40 billion of shortdated Treasury securities. So why do people think that that quotes liquidity is going to go into the riskiest asset class? Why do why do people make that assumption? Because if the Fed comes in to David Lyn and says, "I'm going to buy your Treasury bills and you sell the Fed your Treasury bills and now you don't have those Treasury bills anymore, the safest asset class." Are you going to say to yourself, "I'm going to take this money. I gave up my treasury bills and I'm gonna replace my treasury bills with the NASDAQ 100. Really? Is that the substitute for the riskless asset that you just lost to the Fed? You're going to go buy the riskiest asset class. You see, that's the thing is that people talk they talk and they talk and they say, "Oh, well, this is great news for the the stock market's doing what it's doing where this is the Santa Claus rally. We're in the most powerful positive seasonal period of the year. um investors are pricing in 13% earnings growth next year. So what's that got to do with the Fed? It has has to do with confidence. But you're not going to convince me that the Fed buying uh the the Fed buying Treasury bills replacing that that that's a surrogate for going and buying the S&P 500, the Dow, the Nasdaq 100. It makes no sense to me. So if you're going to tell me, oh well, the Fed's doing QE and I'm bullish on the stock market, I would just suggest find another reason to be bullish on the stock market. There's probably other more valid reasons than what the Fed is doing. >> I will get to your market outlook in just a minute. Uh but let's take a look at uh what you think the Fed's going to do next year. You previously said to me a couple years ago that if we do get a recession, typically in past recessions cuts by 500 basis points, that brings us all the way back down to zero. I suppose that's not happening in 2026. Where am I wrong? >> Well, look, the um I'm taking my clues from the labor market. And if you're looking at the labor market and you do the adjustment that Jay Powell already told us that non-form payrolls have been overstated because of the birth death model by 60,000 per month and then you look at the actual data which has really slowed down dramatically. Uh employment is actually contracting. uh and you've seen that in the uh especially in in the uh in the JOL data, the gap between hirings and firings. Uh and you're seeing it in the uh ADP data as well. Especially small businesses have been laying off people on net for four months in a row. What's that telling you? You see, what makes small businesses important is that they are in the weeds of the economy. They're on in the front lines. They don't have a fancy schmancy uh HR department in some ivory tower. They make changes quickly. Small businesses have been letting go of their staff four months in a row, but I can understand that a lot of the data recently have been distorted. Uh the government shutdown, you want to look through the monthly wiggles. So let's take a take a look at holistically at the broad trend in employment and let's look at non-farm payrolls uh even with the upside skew from the birth death [clears throat] model uh which is going to be redressed in the future. What's the year-over-year trend in non-farm payrolls? It's 6%. It's half what it was a year ago. It's basically a third of what it was three years ago. uh we're down to 6%, we're almost flat the trend in employment. What's more important than employment? But of course, it can get masked when you're drawing down your savings rate to support consumption. But what I'll tell you is data back to 1948 that in an employment slowdown, when non-farm payrolls get to 0.6% year-over-year, you are in a recession 100% of the time. 11 for 11. And of course, people don't recognize that. But why why would they recognize that? Uh I think we had this condition in the opening months of 2008. The recession began in December 2007 and people didn't start to talk recession until Mel and Lehman and AIG collapsed in September of 2008. So if you looked at the labor market and you looked at the trend and the decay in the trend, you could build the assumption that a recession is probably already starting. And this is the beauty is that nothing is priced for it. It's in nobody's forecast. There is not one strategist on Wall Street that's even calling for a down market in the coming year. There is no economist calling for recession and there's no asset class priced for it. So this is actually perfect. Everybody believes that the big beautiful bill, the tax refunds and the opening months and the accelerated bonus depreciation allowances are going to save the day, but I think it's too late. And I think the Fed, this is one area I'll agree with Donald Trump on. I think the Fed has kept policy too tight for too long. And on top of that, even though all these different measures of uncertainty are off the boil, if you take a look at the classic measures of uncertainty and they go back in time and these data exist, trade policy uncertainty, fiscal policy uncertainty, immigration uncertainty, and the mother of them all, David, healthc care uncertainty, they're running between two and four standard deviation events. They're still two to four times higher than they've been in the past. uh and that is a debt weight drag on economic activity. Now you're going to tell me well look at the number we got for the third quarter real GDP. Well the fourth quarter is going to be quite a bit different than that but even that third quarter number I said before I said fugazi that number has a lot of air in it. Okay, there were a lot of segments of that report. Residential construction was negative. Non-residentidential construction was negative. X AI capex is not growing at all. And then you had basically large chunks of the consumer spec space which was actually negative. And what was going up were stuff that the high-end consumer was drawing down their savings rate to support. I was very unimpressed. But the labor market will tell the tale. And the labor market right now is sending me a recessionary signal. I know that >> I know that um far from the consensus view, but you know what makes this really interesting is that you know back in 2022 2023 when we had the recession scare and the Fed's tightening, we have inflation, the Fed invers curve, and everybody's talking recession. Everybody has a recession in the forecast. Uh and recession never comes. >> That's right. And now and now and now even though the recession risk is higher, the labor market is in a much more precarious state and that affects 70% of the economy called the consumer. It affects 80% of income which is labor income. And it's interesting to me because the reason we didn't get the recession in 2022, 2023 that we're all waiting for is because employment never decelerated. The labor market was strong throughout that whole period, inverted yield curve or not. But we have a different labor market on our hands right now. And I think that the hawks on the Fed that are so totally focused on inflation being above target uh are missing something very important, which is that the labor market is in a much more precarious situation than inflation is right now. And they do have a dual mandate. Uh so I think that that is really if you're going to ask me what is what's on my mind the most it is what are the implications of the fact that the trend in employment is heading towards zero >> that's actually supported by >> and how are you going to grow the economy we're going to we're going to rely like again when you look at the third quarter number really really 43 unreal GDP when the index of aggregate hours worked was 0.5 you're going to tell me that all of a sudden general of AI which is in its infancy stages is producing like what like 4% productivity growth more than double the historical norm. You're going to convince me of that. There's no way you could look at the labor market. We were 0.5% on total labor input and annual rate and it spins off 43 on real GDP growth. >> So it doesn't it doesn't pass the Steph test. >> This is your this is your tweet. I love reading through the comments of people's tweets by the way. Just people supporting and sometimes disagreeing with you. This guy said, "While eggs, gas, other items may be lower. My family's health insurance went up 17%, homeowners insurance rose, uh, car insurance rose 9%." And then somebody else posted an article uh with the headline consumer confidence slides in December. And if you look at the Michigan Consumer Confidence Index, I actually had the um the team on uh my show that put together that index. Um, you know, that that's at a record low since I think the uh either the 80s or 60 camera, but it was a multi-deade low. Now I want to go back to your uh your your your comment about employment. This is from Koshi. This is a prediction market and traders are actually supporting what exactly what you're saying. They're saying how high will will unemployment get before 2030. Almost nobody thinks unemployment will be below 5% in the next four years which is extraordinary. Above 5% 98% above 6% 90%. Above 7% 76% it peaks out about 9% 50% and then it goes down. know very few people actually think it's going to go above 9% double digit but still I mean doubling the unemployment rate from current levels is what basically this distribution is showing us how do you go about reconciling the fact that even traders on prediction markets are saying the labor market is going to get get a lot worse consumer confidence is at all-time lows and yet you've got positive real GDP growth you've got uh the government saying the economy is growing growing well and you've got the stock markets grinding to all-time highs which is seemingly ignoring everything we've talked about this doesn't make a lot of sense on the surface. >> Well, okay. So, the first thing I'll say is, you know, we also got the the the conference board version of consumer confidence. >> Yeah. >> And it's a lot of very rich information on the labor market and uh there's the jobs hard to get series and the jobs are plentiful series. Uh and those two measures when you look at the gap because it tracks the unemployment rate is telling you the unemployment rate is going to be going above 6%. Uh you know we're we're we're 4.6 right now. Uh and there's of course you're going above 6% and and the Fed's telling you that its estimate of the full employment unemployment rate unemployment rate in a steady state economy is 4.2 2 and we're going to go above 6%. That's what the conference board numbers that that was the the the most important data today was the jobs hard to get, jobs are plentiful. And um I think that we have this uh you know we we have this disconnect because we have the analyst community the bottomup community is telling you that earnings growth uh is going to be 13% next year and you have investors that invest around the consensus earnings forecast. Um so they believe in that. Of course they had a similar forecast going 2008 when I was at Mother Merrill that didn't turn out so well. they had a similar forecast going into 2022 that didn't work out so well. Um but I think that investors are going to be very surprised. So I think that what's happened is that um the investing community is not looking at the data. They're looking at the analyst forecast for next year. >> Okay. uh and and the and and don't you know the bottom line is that over the past 25 years there's not been one time, not once, and I'll tip my hat to Fred Hickey on uh to um uh I was going to say Fred Hickey, but uh I think it's a it's a different uh hickey that uh I'm talking about. Fred Hickey is a good friend of mine. Um, but over the past 25 years, there's not been one year where the analyst community was predicting a uh a down market. Every year it's an up market. Uh, it's incredible. But this is the industry that we're in. It's populated by wideeyed bulls because the market does go up most of the time. However, in the past 25 years, the market went down nine of those years. And those were the years where the analysts were wrong and the strategists were wrong. Uh and investors were burnt. Um so they listened to the analysts. Uh the analysts are close to the companies. They listen to the strategists. They're trained to follow the stock market. Um but it is curious that they've never not once in the past 25 years at the end of a given year called for a down market. Uh and so that's what's happening right now. Uh people are focused on people are focused on the earnings estimates. uh and and that's a a big part of it. >> But do you if you were if I were to put a finger on it, David, I mean unemployment up to 9% by 2030. What kind of assumptions would you make to whether or not assess if you agree or disagree with that? >> Well, that's Well, I I I'm not at 9%. 9% would be like a you know, you're talking about a borderline depression. U 9%. >> Yeah. >> No, I'm not a 9%. Um, yeah, I guess people might be thinking, well, AI is going to be a major do job destroyer, displacer, and that that could be, but I think 9% is a is a is a little rich. Uh, I mean, I tell people that I'm at 6%. 6% is enough to generate a recession. Uh, I don't have to go to 7, eight or nine. That is uh well, that's basically that's that's extreme. I'm not going to say it's impossible. That's not my forecast. But you're already at uh 46. The trend unemployment is going up. Uh and Fed policy is still deliberately tight. We could argue where our star is, but Fed policy is deliberately tight. Uh and you know, we're going to get those tax we've had tax refunds before. Uh George W. Bush brought in huge tax refunds back in uh 2001. uh that didn't stop the tech wreck recession. These sorts of things, even accelerated appreciation allowances, these things do not really influence uh the business cycle that they might cushion the blow, but we are paying a price for the Fed's unduly tight policy. I said before it's one of the only things I agree with Donald Trump on to be honest with you. >> Yeah. >> And I think that we still have these elevated uncertainty levels. There's other things that are keeping the economy afloat. the the stock market's impact on high-end spending. I mean, the low-end and now the middle end consumer is in a recession. Housing is in a recession. Old economy capital spending is in a recession. Non-resident construction is in a recession. You have white swas of the economy, but it's being offset by what's happening with AI. AI is having a direct impact. Small share of the economy still, but it's AI and related spending is up. Last I saw something like a 17% annual rate this year. Uh the rest of the capital spending is negative3. Uh and I said earlier that uh you adjust for the savings rate. The only reason why consumer spending is up is because of the draw down in the savings rate and that goes right back to the equity market, the wealth effect on spending and especially the high end. But you look at the low-end consumer, middle-end consumer, housing, non-resident construction, old economy, capex, and that saw an insignificant share of the economy. They're they've already rolled over. >> So for people to to talk to me about 4.3%. >> Yeah. >> 4.3%. I mean, it makes it really makes no sense. It almost almost puts me into the camp of being a conspiracy theorist. Uh, I mean, we we know that when you you know, the the BLS put in a bunch of zeros, you know, in the October CPI. Uh, and I'm not so sure I would have trended it out, but I mean, 4.3, there's not a snowballs chance in hell that you could read the Fed's Beige book for the last quarter when it said that on that the economy is contracting. I've never seen I've been in the business since the mid 80s. I've never seen a beige book so downbeat on the economy and we print 4.3 on real GDP. It it it's it it really um it stretches credibility. Uh I don't know if that's why the stock market's rallying. We got this we got this very powerful seasonals. The big story would be if the stock market wasn't rallying now to the opening week of next year. However, for people to say to me, well, about the QE from the Fed, please give me a break. uh and and the GDP data really really the the the data the data that nobody talks about is real personal incomes are basically flat for two quarters in a row once you adjust for government benefits there's no growth in real personal disposable income but strive 70% of the economy called the consumer. So this is all very very strange uh as far and and so there's just there's just too many anomalies then basically I mean how many times in our lives do we see.5% annualized on aggregate hours worked spin-off 43 on real GDP really 4% productivity >> like uh like Merlin the magician I mean it just basically uh it just it just doesn't add up as far as the economy is concerned As far as next year, um, look, I I think once again, >> let's talk about some things you're bullish on. So, speaking of that that that that the labor market, >> the decay in the pace of job creation has me concerned. The fact that the hiring rate is at a 15-year low means that even if we got a modicum of layoffs, we're going to start to see a sequence of negatives on non-farm payroll. So, you're going to ask me what will knock investors off this view that there's no recession next year is if we start printing negative non-farm payrolls month in month out. And we are at the cutting edge right now. When you look at hiring rates and firing rates, we're we're really on thin ice. But my big concern is what the labor market is flashing in front of my eyes right now, which nobody else is really paying much attention to. >> Uh turning now to uh you listed 13 13 things you're bullish on. We don't have to list all of them. Um, we can just comment on what we see on the screen here. Key takeaways, uh, uranium, utilities, gold, gold miners, Asian equities, aerospace, and defense. Again, we don't have to go through every single one individually, but is there a central theme tying these bullish calls together, David, for 2026? >> Well, look, uh, we want hard we want hard assets, uh, that will spin off a cash flow stream. Uh so u that's why you talk about uh uh utilities, uranium, we look at those as hard assets, spin off an income stream. Um we've also added uh energy infrastructure and Canadian pipelines. Um same sort of thing. We've done that recently. Aerospace defense. Uh well, that's just basically a buy and hold no-brainer when you consider where global military spending is going and the geopolitical risks that continue to rise. uh gold and silver and the miners, they speak for themselves. Uh and really the central banks globally continue to diversify in a bullion reserves. Um the other precious metals uh have latched on and in fact in a lot of cases done better than gold this year. Um but we're still in that trade and uh we'll be out of it. The first central bank that says we're done buying gold will be the time that we start to really take down that position. Um and um you know we also like uh we we like US bonds. We like guilts. We want yield. >> We think inflation is going to come down faster than people think. And both the UK and the US and they have the highest nominal yields in the G10. So we are there as far as uh bonds, I don't see it on that list, but utilities also you can argue have growth characteristics, but they also have I call them bonds and drag. They have that yield. um aerospace defense I said before military budgets but that's a a more attractive way to play um technology because aerospace defense is basically a proxy for technology today uh and especially in the cyber area which we're very bullish on um yeah so basically uh you know despite my dow view on the US economic outlook I'm not saying that hell's going to freeze over uh I'm not going to say you got to go out and buy baked beans s off shotguns can you bar wire um but I think that what you want to be in the coming years be very thematic in nature do not be buying uh passive uh index funds um and be mindful of your cyclicality I mean if you're taking a look except for Asian equities uh which we like the secular story in Asia um but you'll see that we have a very low cyclical exposure uh very defensively minded and the overall theme here basically if you're taking a look at the whole model portfolio that we have it's low beta high sharp ratio and a running yield uh that's comparable to what you'll get in the money [clears throat] market. Uh so dial down the risk and be creative and thematic in your thinking for next year. I would not be buying the indices. That's one thing I would stay away from. Basically, it's a picker game. All right. Well, thank you very much, David. Appreciate your thoughts. Where else can we learn about your work or at least I'm on your website right now. Where can people go to at least uh learn more about your calls, get more information? >> Sure. Well, you can either you can always just Google Rosenberg Research and go right on the website. If you go information rosenbergressearch.com, it'll take you right to the page where you could uh enroll for a free trial for my research or if there's anything I said uh that uh angered you uh that uh you want to um you know have a a debate with me or anything that you want to learn um from me personally, uh I won't give you my phone number, but I'll give you my email address uh D. Rosenberg. So, drosenberg rosenbergressearch.com and I'd love to hear from you. >> All right. You can also email David if you're just happy about what he said. You don't necessarily have to be angry to email him. >> Do we, you know, we can all use friends. That much is for sure. >> Well, we appreciate it once again. Thank you. That was David Rosenberg, president of Rosenberg Research. Do check out his work, links down below, and don't forget to subscribe to my channel if you haven't already. And of course, don't forget to use my code lin l i n when you sign up to koshi link down below or scan the QR code here. New users will get $10 on their first $100 deposit.
Blowout GDP Report Is 'Manipulated', 2026 Economy Reaches Breaking Point | David Rosenberg
Summary
Transcript
I mean the low end and now the middle end consumer is in a recession. Housing is in a recession. Old economy capital spending is in a recession. Non-resident construction is in a recession. You have white swas of the economy, but it's being offset by what's happening with AI. They they've already rolled over. So people to talk to me about 4.3%. >> Yeah. >> 4.3%. I mean it makes it it really makes no sense. >> A bombshell GDP report was released this week. We're going to find out what this means, why it's important, and what's ahead for 2026. This video is sponsored by Koshi. It's a fully regulated platform that lets you trade on real world events from economic data to political outcomes. Traders can put money down on their favorite teams, events, elections, and more in all 50 states, including California and Texas and over 140 countries. Go to Koshi and use the code lyn l i n link down below or scan the QR code here and new users will get $10 off on their first $100 deposit. Our next guest is David Rosenberg, uh, president of Rosenberg Research and he's going to give us a breakdown for 2026. And we're going to find out from him whether or not 2026 is going to be as Rosie as David's nickname, Rosie. Welcome back to the show, David. Good to see you. >> Thanks, uh, David. Great to be on again. Let's take a look at by the way people can check out our last discussion with David link down below where we had a panel uh bull and bear debate with uh Edardenni very good uh discussion here uh let's start with today's GDP numbers US economy expanded fastest paced in 2 years so initial reading of third quarter GDP uh showed us economy expanded at an inflation adjusted annualized rate of 4.3% a far faster pace than 3.8% 8% recorded in the prior quarter. You tweeted though uh this is kind of smoke and mirrors. If you think the CPI data was manipulated, so was today's GDP report. Strip out governments sliding imports in the sharp draw down in the personal savings rate in support of consumption. And guess what? Real GDP was actually 0.8% in Q3, nowhere near the 4.8 uh 4.3% of Fugazi, if there ever was one. Uh tell us about what you mean by this. Why are we stripping those items out in particular? Well, it's just to um basically isolate uh what were the idiosyncratic factors behind that 4.3. Uh so for example uh arithmetically when imports go down uh the subtraction is actually a net contribution to GDP. So that was one factor. Uh you know government uh is government. um you know I don't know what multiple an equity market investor would put on the fact that government spending uh was a feature uh in the report uh and then you have the situation where as you had mentioned earlier the the high-end consumer continues to blaze the trail uh for the overall household sector. Um so what we had was really an epic uh decline in the personal savings rate. You know, you you talk to a non-economist about the savings rate and uh people just roll their eyes uh and they freeze. But it's the most important behavioral aggregate in the national accounts that uh decision at the margin as to how much money you're going to save or spend out of your uh current income. So, the savings rate went from 5% uh to 4.2%. Uh an 8/10 decline in a quarter is a really big deal. It's um and it's the lowest level we've had since uh well in basically over 3 years. So um what that's telling you is that I'm not going to say necessarily artificial growth in consumer spending. It just wasn't based on organic income. It was basically people especially the high end running down their savings rate um because they feel comfortable with their nest egg rising as much as it's been uh with the stock market. Um so my major point was that when you adjust the number for the drop in the savings rate uh which is sort of like a juicing up of the data because it wasn't based out of income uh the government and then the arithmetic contribution from declining imports um and of course the trade data have been all over the place this year because of the tariff file. Well, basically, you're talking about real GDP growth running below 1%. In other words, it was a lopsided report. Uh, I think you want to take a look not just at the headline, but what were the drivers and just the decline in the savings rate alone contributed 60% of the growth to the overall economy. That's how powerful that was. And the major point I'm going to make, David, is, you know, you um, you know, you bring up the point that the US economy is booming. 4.3% real GDP growth. >> But that's because we're so narcissistic that we measure economic success in terms of spending. Um you can draw down your savings rate because you're feeling more confident. Sure, you can borrow money with your credit card spend. But the question that should we should really ask is, you know, what was what do the income numbers look like? What did income look like? and real disposable income growth uh was basically flat for the second quarter in a row. There's no growth in the past 6 months in real after tax personal income. And yet we have this booming consumer on our hands. And and that's a dichotomy I think that we have to pay attention to because it tells me this the stock market and the economy are so tightly wound up with each other uh that what's driving the economy now it used to be when I started on the business in the mid1 1980s people on the trading desk would say what's the economy going to do so they could make a view on what the stock market was going to do but now it's basically the economist goes to the equity strategist and says, "What's your stock market call?" Cuz I got to put that into my GDP model. >> Wow. >> So, you got this stock market strength that's driving the savings rate down, especially in the high-end consumer that's carrying all the load. And that to me is one of the big factors uh in the data today that even if you don't want to use imports or government, well, you'll say, "Well, government's part of the economy. Why wouldn't you include that?" Okay, sure. But it's the nature of this consumer boom that basically we have consumers spending money with income growth flat. How sustainable is that model? It's going to last as long as the bull market and equities. So if you're going to ask me my outlook on 2026 for the economy, tell me what the stock market's going to do. And I'll just tell you that the stock market continues to go up, that savings rate goes down, and it's going to be all rosy posy. You use the word rosy. But this is a it's not your classical model where incomes are driving consumer spending. If consumers in the third quarter were forced to spend their income and nothing else, if they were constrained by their income growth, then the consumer spending segment, which was way above expected, it was 3.5% at an annual rate. But if they were forced, the consumer was forced to spend in line with their incomes. David, the consumer would have been flat last quarter and we'd be talking about a completely different narrative. >> So, can we make the I guess judgment that because the Fed is going to continue cutting into the new year. They've already embarked on what people call QE. So, that's going to continue driving asset prices up and the consumer that you're talking about, this consumer boom will continue. That's going to drive growth. >> No, I'm not saying that. I'm [clears throat] saying that we have a a 95% correlation between GDP and S&P and that the the stock market has never before in our lives been such a principal determinant of where the economy is going. So if the stock market stumbles through it whatever reason or just stops going up, it's going to have a big impact on GDP growth no matter what the labor market is doing. I mean, can we really look like the the other part of this, let me just say, by the way, I guess we could debate whether it's uh QE or not QE, what the Fed is doing, the Fed will tell you that's not classic quantitative easing. Uh because it's not intended to juice animal spirits. And you'll say, well, that's the net result. But the the thing I would ask you is this is they're buying Treasury bills, right? They're buying like $40 billion of shortdated Treasury securities. So why do people think that that quotes liquidity is going to go into the riskiest asset class? Why do why do people make that assumption? Because if the Fed comes in to David Lyn and says, "I'm going to buy your Treasury bills and you sell the Fed your Treasury bills and now you don't have those Treasury bills anymore, the safest asset class." Are you going to say to yourself, "I'm going to take this money. I gave up my treasury bills and I'm gonna replace my treasury bills with the NASDAQ 100. Really? Is that the substitute for the riskless asset that you just lost to the Fed? You're going to go buy the riskiest asset class. You see, that's the thing is that people talk they talk and they talk and they say, "Oh, well, this is great news for the the stock market's doing what it's doing where this is the Santa Claus rally. We're in the most powerful positive seasonal period of the year. um investors are pricing in 13% earnings growth next year. So what's that got to do with the Fed? It has has to do with confidence. But you're not going to convince me that the Fed buying uh the the Fed buying Treasury bills replacing that that that's a surrogate for going and buying the S&P 500, the Dow, the Nasdaq 100. It makes no sense to me. So if you're going to tell me, oh well, the Fed's doing QE and I'm bullish on the stock market, I would just suggest find another reason to be bullish on the stock market. There's probably other more valid reasons than what the Fed is doing. >> I will get to your market outlook in just a minute. Uh but let's take a look at uh what you think the Fed's going to do next year. You previously said to me a couple years ago that if we do get a recession, typically in past recessions cuts by 500 basis points, that brings us all the way back down to zero. I suppose that's not happening in 2026. Where am I wrong? >> Well, look, the um I'm taking my clues from the labor market. And if you're looking at the labor market and you do the adjustment that Jay Powell already told us that non-form payrolls have been overstated because of the birth death model by 60,000 per month and then you look at the actual data which has really slowed down dramatically. Uh employment is actually contracting. uh and you've seen that in the uh especially in in the uh in the JOL data, the gap between hirings and firings. Uh and you're seeing it in the uh ADP data as well. Especially small businesses have been laying off people on net for four months in a row. What's that telling you? You see, what makes small businesses important is that they are in the weeds of the economy. They're on in the front lines. They don't have a fancy schmancy uh HR department in some ivory tower. They make changes quickly. Small businesses have been letting go of their staff four months in a row, but I can understand that a lot of the data recently have been distorted. Uh the government shutdown, you want to look through the monthly wiggles. So let's take a take a look at holistically at the broad trend in employment and let's look at non-farm payrolls uh even with the upside skew from the birth death [clears throat] model uh which is going to be redressed in the future. What's the year-over-year trend in non-farm payrolls? It's 6%. It's half what it was a year ago. It's basically a third of what it was three years ago. uh we're down to 6%, we're almost flat the trend in employment. What's more important than employment? But of course, it can get masked when you're drawing down your savings rate to support consumption. But what I'll tell you is data back to 1948 that in an employment slowdown, when non-farm payrolls get to 0.6% year-over-year, you are in a recession 100% of the time. 11 for 11. And of course, people don't recognize that. But why why would they recognize that? Uh I think we had this condition in the opening months of 2008. The recession began in December 2007 and people didn't start to talk recession until Mel and Lehman and AIG collapsed in September of 2008. So if you looked at the labor market and you looked at the trend and the decay in the trend, you could build the assumption that a recession is probably already starting. And this is the beauty is that nothing is priced for it. It's in nobody's forecast. There is not one strategist on Wall Street that's even calling for a down market in the coming year. There is no economist calling for recession and there's no asset class priced for it. So this is actually perfect. Everybody believes that the big beautiful bill, the tax refunds and the opening months and the accelerated bonus depreciation allowances are going to save the day, but I think it's too late. And I think the Fed, this is one area I'll agree with Donald Trump on. I think the Fed has kept policy too tight for too long. And on top of that, even though all these different measures of uncertainty are off the boil, if you take a look at the classic measures of uncertainty and they go back in time and these data exist, trade policy uncertainty, fiscal policy uncertainty, immigration uncertainty, and the mother of them all, David, healthc care uncertainty, they're running between two and four standard deviation events. They're still two to four times higher than they've been in the past. uh and that is a debt weight drag on economic activity. Now you're going to tell me well look at the number we got for the third quarter real GDP. Well the fourth quarter is going to be quite a bit different than that but even that third quarter number I said before I said fugazi that number has a lot of air in it. Okay, there were a lot of segments of that report. Residential construction was negative. Non-residentidential construction was negative. X AI capex is not growing at all. And then you had basically large chunks of the consumer spec space which was actually negative. And what was going up were stuff that the high-end consumer was drawing down their savings rate to support. I was very unimpressed. But the labor market will tell the tale. And the labor market right now is sending me a recessionary signal. I know that >> I know that um far from the consensus view, but you know what makes this really interesting is that you know back in 2022 2023 when we had the recession scare and the Fed's tightening, we have inflation, the Fed invers curve, and everybody's talking recession. Everybody has a recession in the forecast. Uh and recession never comes. >> That's right. And now and now and now even though the recession risk is higher, the labor market is in a much more precarious state and that affects 70% of the economy called the consumer. It affects 80% of income which is labor income. And it's interesting to me because the reason we didn't get the recession in 2022, 2023 that we're all waiting for is because employment never decelerated. The labor market was strong throughout that whole period, inverted yield curve or not. But we have a different labor market on our hands right now. And I think that the hawks on the Fed that are so totally focused on inflation being above target uh are missing something very important, which is that the labor market is in a much more precarious situation than inflation is right now. And they do have a dual mandate. Uh so I think that that is really if you're going to ask me what is what's on my mind the most it is what are the implications of the fact that the trend in employment is heading towards zero >> that's actually supported by >> and how are you going to grow the economy we're going to we're going to rely like again when you look at the third quarter number really really 43 unreal GDP when the index of aggregate hours worked was 0.5 you're going to tell me that all of a sudden general of AI which is in its infancy stages is producing like what like 4% productivity growth more than double the historical norm. You're going to convince me of that. There's no way you could look at the labor market. We were 0.5% on total labor input and annual rate and it spins off 43 on real GDP growth. >> So it doesn't it doesn't pass the Steph test. >> This is your this is your tweet. I love reading through the comments of people's tweets by the way. Just people supporting and sometimes disagreeing with you. This guy said, "While eggs, gas, other items may be lower. My family's health insurance went up 17%, homeowners insurance rose, uh, car insurance rose 9%." And then somebody else posted an article uh with the headline consumer confidence slides in December. And if you look at the Michigan Consumer Confidence Index, I actually had the um the team on uh my show that put together that index. Um, you know, that that's at a record low since I think the uh either the 80s or 60 camera, but it was a multi-deade low. Now I want to go back to your uh your your your comment about employment. This is from Koshi. This is a prediction market and traders are actually supporting what exactly what you're saying. They're saying how high will will unemployment get before 2030. Almost nobody thinks unemployment will be below 5% in the next four years which is extraordinary. Above 5% 98% above 6% 90%. Above 7% 76% it peaks out about 9% 50% and then it goes down. know very few people actually think it's going to go above 9% double digit but still I mean doubling the unemployment rate from current levels is what basically this distribution is showing us how do you go about reconciling the fact that even traders on prediction markets are saying the labor market is going to get get a lot worse consumer confidence is at all-time lows and yet you've got positive real GDP growth you've got uh the government saying the economy is growing growing well and you've got the stock markets grinding to all-time highs which is seemingly ignoring everything we've talked about this doesn't make a lot of sense on the surface. >> Well, okay. So, the first thing I'll say is, you know, we also got the the the conference board version of consumer confidence. >> Yeah. >> And it's a lot of very rich information on the labor market and uh there's the jobs hard to get series and the jobs are plentiful series. Uh and those two measures when you look at the gap because it tracks the unemployment rate is telling you the unemployment rate is going to be going above 6%. Uh you know we're we're we're 4.6 right now. Uh and there's of course you're going above 6% and and the Fed's telling you that its estimate of the full employment unemployment rate unemployment rate in a steady state economy is 4.2 2 and we're going to go above 6%. That's what the conference board numbers that that was the the the most important data today was the jobs hard to get, jobs are plentiful. And um I think that we have this uh you know we we have this disconnect because we have the analyst community the bottomup community is telling you that earnings growth uh is going to be 13% next year and you have investors that invest around the consensus earnings forecast. Um so they believe in that. Of course they had a similar forecast going 2008 when I was at Mother Merrill that didn't turn out so well. they had a similar forecast going into 2022 that didn't work out so well. Um but I think that investors are going to be very surprised. So I think that what's happened is that um the investing community is not looking at the data. They're looking at the analyst forecast for next year. >> Okay. uh and and the and and don't you know the bottom line is that over the past 25 years there's not been one time, not once, and I'll tip my hat to Fred Hickey on uh to um uh I was going to say Fred Hickey, but uh I think it's a it's a different uh hickey that uh I'm talking about. Fred Hickey is a good friend of mine. Um, but over the past 25 years, there's not been one year where the analyst community was predicting a uh a down market. Every year it's an up market. Uh, it's incredible. But this is the industry that we're in. It's populated by wideeyed bulls because the market does go up most of the time. However, in the past 25 years, the market went down nine of those years. And those were the years where the analysts were wrong and the strategists were wrong. Uh and investors were burnt. Um so they listened to the analysts. Uh the analysts are close to the companies. They listen to the strategists. They're trained to follow the stock market. Um but it is curious that they've never not once in the past 25 years at the end of a given year called for a down market. Uh and so that's what's happening right now. Uh people are focused on people are focused on the earnings estimates. uh and and that's a a big part of it. >> But do you if you were if I were to put a finger on it, David, I mean unemployment up to 9% by 2030. What kind of assumptions would you make to whether or not assess if you agree or disagree with that? >> Well, that's Well, I I I'm not at 9%. 9% would be like a you know, you're talking about a borderline depression. U 9%. >> Yeah. >> No, I'm not a 9%. Um, yeah, I guess people might be thinking, well, AI is going to be a major do job destroyer, displacer, and that that could be, but I think 9% is a is a is a little rich. Uh, I mean, I tell people that I'm at 6%. 6% is enough to generate a recession. Uh, I don't have to go to 7, eight or nine. That is uh well, that's basically that's that's extreme. I'm not going to say it's impossible. That's not my forecast. But you're already at uh 46. The trend unemployment is going up. Uh and Fed policy is still deliberately tight. We could argue where our star is, but Fed policy is deliberately tight. Uh and you know, we're going to get those tax we've had tax refunds before. Uh George W. Bush brought in huge tax refunds back in uh 2001. uh that didn't stop the tech wreck recession. These sorts of things, even accelerated appreciation allowances, these things do not really influence uh the business cycle that they might cushion the blow, but we are paying a price for the Fed's unduly tight policy. I said before it's one of the only things I agree with Donald Trump on to be honest with you. >> Yeah. >> And I think that we still have these elevated uncertainty levels. There's other things that are keeping the economy afloat. the the stock market's impact on high-end spending. I mean, the low-end and now the middle end consumer is in a recession. Housing is in a recession. Old economy capital spending is in a recession. Non-resident construction is in a recession. You have white swas of the economy, but it's being offset by what's happening with AI. AI is having a direct impact. Small share of the economy still, but it's AI and related spending is up. Last I saw something like a 17% annual rate this year. Uh the rest of the capital spending is negative3. Uh and I said earlier that uh you adjust for the savings rate. The only reason why consumer spending is up is because of the draw down in the savings rate and that goes right back to the equity market, the wealth effect on spending and especially the high end. But you look at the low-end consumer, middle-end consumer, housing, non-resident construction, old economy, capex, and that saw an insignificant share of the economy. They're they've already rolled over. >> So for people to to talk to me about 4.3%. >> Yeah. >> 4.3%. I mean, it makes it really makes no sense. It almost almost puts me into the camp of being a conspiracy theorist. Uh, I mean, we we know that when you you know, the the BLS put in a bunch of zeros, you know, in the October CPI. Uh, and I'm not so sure I would have trended it out, but I mean, 4.3, there's not a snowballs chance in hell that you could read the Fed's Beige book for the last quarter when it said that on that the economy is contracting. I've never seen I've been in the business since the mid 80s. I've never seen a beige book so downbeat on the economy and we print 4.3 on real GDP. It it it's it it really um it stretches credibility. Uh I don't know if that's why the stock market's rallying. We got this we got this very powerful seasonals. The big story would be if the stock market wasn't rallying now to the opening week of next year. However, for people to say to me, well, about the QE from the Fed, please give me a break. uh and and the GDP data really really the the the data the data that nobody talks about is real personal incomes are basically flat for two quarters in a row once you adjust for government benefits there's no growth in real personal disposable income but strive 70% of the economy called the consumer. So this is all very very strange uh as far and and so there's just there's just too many anomalies then basically I mean how many times in our lives do we see.5% annualized on aggregate hours worked spin-off 43 on real GDP really 4% productivity >> like uh like Merlin the magician I mean it just basically uh it just it just doesn't add up as far as the economy is concerned As far as next year, um, look, I I think once again, >> let's talk about some things you're bullish on. So, speaking of that that that that the labor market, >> the decay in the pace of job creation has me concerned. The fact that the hiring rate is at a 15-year low means that even if we got a modicum of layoffs, we're going to start to see a sequence of negatives on non-farm payroll. So, you're going to ask me what will knock investors off this view that there's no recession next year is if we start printing negative non-farm payrolls month in month out. And we are at the cutting edge right now. When you look at hiring rates and firing rates, we're we're really on thin ice. But my big concern is what the labor market is flashing in front of my eyes right now, which nobody else is really paying much attention to. >> Uh turning now to uh you listed 13 13 things you're bullish on. We don't have to list all of them. Um, we can just comment on what we see on the screen here. Key takeaways, uh, uranium, utilities, gold, gold miners, Asian equities, aerospace, and defense. Again, we don't have to go through every single one individually, but is there a central theme tying these bullish calls together, David, for 2026? >> Well, look, uh, we want hard we want hard assets, uh, that will spin off a cash flow stream. Uh so u that's why you talk about uh uh utilities, uranium, we look at those as hard assets, spin off an income stream. Um we've also added uh energy infrastructure and Canadian pipelines. Um same sort of thing. We've done that recently. Aerospace defense. Uh well, that's just basically a buy and hold no-brainer when you consider where global military spending is going and the geopolitical risks that continue to rise. uh gold and silver and the miners, they speak for themselves. Uh and really the central banks globally continue to diversify in a bullion reserves. Um the other precious metals uh have latched on and in fact in a lot of cases done better than gold this year. Um but we're still in that trade and uh we'll be out of it. The first central bank that says we're done buying gold will be the time that we start to really take down that position. Um and um you know we also like uh we we like US bonds. We like guilts. We want yield. >> We think inflation is going to come down faster than people think. And both the UK and the US and they have the highest nominal yields in the G10. So we are there as far as uh bonds, I don't see it on that list, but utilities also you can argue have growth characteristics, but they also have I call them bonds and drag. They have that yield. um aerospace defense I said before military budgets but that's a a more attractive way to play um technology because aerospace defense is basically a proxy for technology today uh and especially in the cyber area which we're very bullish on um yeah so basically uh you know despite my dow view on the US economic outlook I'm not saying that hell's going to freeze over uh I'm not going to say you got to go out and buy baked beans s off shotguns can you bar wire um but I think that what you want to be in the coming years be very thematic in nature do not be buying uh passive uh index funds um and be mindful of your cyclicality I mean if you're taking a look except for Asian equities uh which we like the secular story in Asia um but you'll see that we have a very low cyclical exposure uh very defensively minded and the overall theme here basically if you're taking a look at the whole model portfolio that we have it's low beta high sharp ratio and a running yield uh that's comparable to what you'll get in the money [clears throat] market. Uh so dial down the risk and be creative and thematic in your thinking for next year. I would not be buying the indices. That's one thing I would stay away from. Basically, it's a picker game. All right. Well, thank you very much, David. Appreciate your thoughts. Where else can we learn about your work or at least I'm on your website right now. Where can people go to at least uh learn more about your calls, get more information? >> Sure. Well, you can either you can always just Google Rosenberg Research and go right on the website. If you go information rosenbergressearch.com, it'll take you right to the page where you could uh enroll for a free trial for my research or if there's anything I said uh that uh angered you uh that uh you want to um you know have a a debate with me or anything that you want to learn um from me personally, uh I won't give you my phone number, but I'll give you my email address uh D. Rosenberg. So, drosenberg rosenbergressearch.com and I'd love to hear from you. >> All right. You can also email David if you're just happy about what he said. You don't necessarily have to be angry to email him. >> Do we, you know, we can all use friends. That much is for sure. >> Well, we appreciate it once again. Thank you. That was David Rosenberg, president of Rosenberg Research. Do check out his work, links down below, and don't forget to subscribe to my channel if you haven't already. And of course, don't forget to use my code lin l i n when you sign up to koshi link down below or scan the QR code here. New users will get $10 on their first $100 deposit.