David Rosenberg: Markets in denial as margins, profits and estimates decline

We have margins being squeezed, profits declining, estimates coming down, the United States Federal Reserve further inverting the curve and yet there’s been an incredible start to the year in the equity market.Article content

I can see why investors were bullish in the depths of the 2020 downturn, because they were able to look across the bridge towards a recovery before long, the Fed rapidly expanding its balance sheet and a near-zero risk-free rate allowing for a vertical move in discounted future corporate cash flows. The exact opposite of the environment we have on our hands today, but everyone seems to be in total denial.

What sort of market has this been so far in 2023? Let’s have a quick look: the heaviest shorted stocks are up 21 per cent, tripling the overall market; short sellers have covered US$51-billion worth of their bearish bets, equivalent to six per cent of the total volume of short activity; cyclicals have beaten defensives by 1,700 basis points; companies with no profits are up 27 per cent; bitcoin and Ark were at one point both up more than 40 per cent; and the bonds for the worst balance sheet...

This has been one speculative market, and one bereft of fundamentals, which should have anyone who is not an active day-trader pretty worried about what happens next. David Rosenberg is founder of independent research firm Rosenberg Research & Associates Inc. You can sign up for a free, one-month trial on Rosenberg’s

Or not. Are we again climbing the wall of worry ?

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