October 24, 2025
The explosive stock market boom since the Covid-19 pandemic has been accurately called a “Roaring Twenties” by long-term market strategist Ed Yardeni. In the years since April 2020, markets have lived up to that sobriquet, despite a sharp nine-month bear market in 2022, as the Fed initiated an aggressive interest rate hiking cycle.
But the rally since October 2022 has left contrarian Canadian economist David Rosenberg looking at another side to the Roaring Twenties. “There were three recessions in the 1920s, and it didn’t end so well,” Rosenberg said in an interview early this week.
Asked if he believes the current bull market is in the eighth or ninth inning, to use a baseball metaphor as his hometown Toronto Blue Jays head for the World Series, he scoffed, “We are well into extra innings.”
Rosenberg, one of Toronto’s few New York Yankees fans, said the ninth inning probably took place sometime in 2024 when the S&P 500 recorded its second straight 20% plus year. “It’s probably in the 12th or 13th inning or, in hockey parlance, well into overtime,” Rosenberg said.
Still, he isn’t making any predictions about how long this bull market could run. Instead, the former chief economist for North America at Merrill Lynch prefers to recall the wisdom of his former boss and mentor at Merrill, Bob Farrell, the storied equity market seer who trained many of today’s leading strategists.
“Exponentially rising markets can go further than you think,” Rosenberg said, quoting Farrell. And when they end, “they don’t go sideways.”
Rosenberg was one of the first Wall Street economists to call the 2007 housing bubble, though senior management at Merrill instructed him not to use that word because they feared it would scare people. Ultimately, they agreed to let him call it a “mania.”
Asked to compare the current market with the pre-1929 period, Rosenberg says it’s like trying to “compare World War I and World War II.” If one takes most equity market models of future performance and plugs in the spectacular 13% annualized returns of the last 15 years, expected returns for the next “one-year, three-year, five-year and 10-year [periods] are negative.”
Generative AI will “not make us smarter,” though it will shift productivity, he said. At present, Rosenberg thinks the addressable market will have “to expand eightfold to $8 trillion,” which doesn’t sound totally implausible given that U.S. GDP is now $30 trillion.
But here’s the problem. Earnings for the S&P 500 will have to increase at a 15% clip between now and 2030, double their historic 8% rate. He assigns a 10% probability to that happening.
Rosenberg noted the Internet performed “as advertised” and delivered “everything it was supposed to do” in the late 1990s and subsequent years. That didn’t prevent the stocks of many highly successful, profitable companies fueling the boom, like Cisco Systems, Microsoft, Intel and IBM, from losing 60% to 80% of their value, he said. Amazon dropped 90%.
One event that the current decade shares with the Roaring Twenties of a century ago is that both began with a global pandemic. However, the policy response this time around was very different, as governments around the world implemented massive stimulus policies.
“A lot of us who predicted there would be a recession” after the Fed began raising interest rates in 2022 and 2023 are “wiping egg off our faces,” Rosenberg acknowledged. What he and his fellow economists failed to realize was that, for the first time, American consumers in particular spent 100% of the stimulus funds they received.
Virtually every crisis in the U.S. since September 11, 2001, has been followed by a stimulus program, he noted. “Normally, 50% gets spent,” he said. “I thought a lot of it would get saved.” Going into COVID, the government realized 40% of Americans didn’t have enough savings to last three months.”
Now excess savings are in the rearview mirror as the labor market is displaying its first “recessionary impulses” in three years, he said. That’s something it didn’t do in 2022 and 2023, when job growth remained robust despite the Fed embarking on its most aggressive hiking cycles since the Paul Volcker days.
Moreover, the Case-Shiller Housing Index has now been down for four months in a row. “Housing has been down for some time,” Rosenberg said. “Deflation is emerging in residential real estate. Who needs the labor market when you have the stock market?”
Perhaps the most glaring indicators are the disconnects that appear when one dissects various components of the University of Michigan consumer sentiment indices, he said. Economist Kyla Scanlon, who coined the phrase “vibecession” to characterize the post-pandemic economy, recently told Bloomberg that the University of Michigan readings are “clocking in near record lows.” Rosenberg said most metrics out of the university’s research arm have only been this low “1% of the time in the last century.”
There is one exception. People’s optimism about the stock market is near historic highs, according to the Michigan data.
That’s why he thinks a bear market could be so painful to today’s affluent retirees, most of whom were in their forties or early fifties when the dot.com bubble burst in 2000. This time around, the oldest baby boomers are about to turn 80, GenX is turning 60 and time is not on their side.
As Ed Yardeni has noted on multiple occasions, it’s the affluent recent retirees enjoying their first “go-go years” out of the workforce who are driving a lot of consumer spending since Covid ended. Much of this spending is focused on discretionary, experiential activities, and could easily be curtailed in a downturn. Back in the 1920s and even the early 2000s, the nation had a much younger, more vibrant demographic profile.
“We’ve never had 72% of the household balance sheet in equities,” he said. “Diversification is a dirty 15-letter word. Concentration risk is layered on top of concentration risk.”
Rosenberg recalled that the 1920s came to “a calamitous end” except for those who had liquidity. Right now, he said, only about 8% of household assets are in bonds.
That kind of asset allocation might work for people in their twenties or thirties, but it could be very painful for folks 60 or older. Bonds are not a topic people want to discuss at cocktail parties, he remarked.
Anyone who thinks Canadians might be better positioned for a downturn than Americans should guess again. “They are all-in on the same trade,” he said.
For his part, Rosenberg believes there will be “plenty of opportunity” for liquid investors still standing after this bull market inevitably runs its course. For now, he is developing his own anti-bubble, anti-AI portfolio, consisting of gold and silver, healthcare companies, utilities, rare earths, uranium and consumer staples, and which may become an ETF next year.
It’s up 27% this year, and it holds no technology or financial companies and no consumer discretionary stocks, he said.
https://www.fa-mag.com/news/david-rosenberg-fears–roaring-twenties–bubble-will-end-in-hell-for-retiree-wave-84614.html?section=3