Rosenberg Warns Fed Walking Into Recession

Economist David Rosenberg has issued a warning about the US economy, saying the Federal Reserve is walking into a recession without realizing it. In a post on X, Rosenberg noted that historically, when the Fed raises interest rates during an oil price shock, it has led to a recession every time since World War II - except for 2022, when the American consumer was boosted by $2 trillion in fiscal stimulus checks.

Rosenberg pointed out that the current situation is different from 2022, as the cushion of pandemic stimulus money no longer exists. He also noted that while AI spending has been a major driver of growth, it may not hold up when financing costs rise.

The economist cited the 2s/10s Treasury spread as a key indicator, which has narrowed to 27 basis points and is close to inverting. An inversion would signal that short-term policy rates are too tight relative to longer-term expectations.