Rosenberg: Overvalued Markets in for a Strong Correction?

The stock market has become overheated since exploding off its March lows and could be in for a strong correction, said economist David Rosenbergm formerly chief economist at Merrill Lynch and now with Gluskin Sheff & Associates. Rosenberg told CNBC the market

is overvalued by at least 20%. But it comes down to what your view in corporate earnings (is) going to be. By the time you’re up 60% from any egregiously oversold low, you’ve already got the earnings recovery.

Source: CNBC, October 27, 2009.

Comments

[damienhaas:]

The correction is forthcoming and the only question is how big is the drop. However with interest rates so low and so much liquidity, the probability of a big drop is unlikely.

Oct 28 08:00 AM

[sequoiab:]

People who entered the market in March don't want to sell stocks this year after such a big rally, they want to hold till next year to avoid paying tax next year. People who lost money don't want to sell either, because market gapped down from 1100 last year on October 3rd, which push all 401k and mutual fund holders into deep water. They are still under water, inches away from the surface.

Oct 28 08:37 AM

[bartpr:]

this stock recovery has been oe of the biggest in history going back to the depression. yet not much has changed in gdp growth to support it. sooner or later the reality will hit, just like the crash from the 29 recovery to the 33 bottom.

Oct 28 08:51 AM

[Belome:]

I would be embarrased to be an employee of Wells Fargo after watching this...no facts or data to back his arguments just a horrible attempt to back the party line that nothing happened but an irrational response to the worst credit meltdown in history...are you kidding me?...all this from a bank thats about to bite it bigtime.

Oct 28 09:47 AM

[untrusting ...:]

The hugh forced short covering in the dollar, with 97% bearish bets on the dollar, is more likely to make Rosenberg correct (in additon to his fundamental overvaluation analysis). Just as short covering was a big factor in the stock rally, dollar short covering and reversal of the carry trade is likely to a big factor in a big downward correction. Certainly seems to be a factor in the 3-5 day sell-offs so far, and likely to continue to be a big factor as well. If the prop trading desks have sold most of their stock inventory into the rally, and are taking up big short postions, it could get to be a real bloodbath again for equities.

Oct 28 07:26 PM