The chief economist and strategist at Gluskin Sheff sounds the alarm on excessive corporate debt loads and weak balance sheets.
Rosenberg thinks this notion will hinder corporate spending going forward, as debt servicing becomes an increasing priority amidst an economic slowdown.
"My thesis all along has been that this will be a capital spending-led recession," he stated."We're going to be finding a lot of the cash flows being diverted to debt service — even under this low interest rate environment — and away from capital spending." Corporations need to invest in new projects, employees, and technology. But when precious capital is diverted to debt servicing, they find themselves hamstrung and unable to invest in the areas that will conjure growth. And a vicious cycle ensues.
To further his point, Rosenberg also notes geopolitical uncertainty — both political and economic — for additional reasons why companies will have a hard time splurging on expenditures. And, with trade war escalations, Brexit, and upcoming election uncertainty looming, it's no wonder why he's sounding the alarm.
Although this isn't the rosiest of outlooks, Rosenberg says one asset has performed well as the going has gotten tougher:"Gold has been rallying in every single currency term," he stated."When gold is firming up against all the currencies, that is the hallmark of a full-fledged bull market."is the most popular vehicle. Having absorbed a net $38 billion of assets over time, it's one of the easiest and most liquid ways to transact the resource.
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