Rosenberg Research Founder and President David Rosenberg stated the probability of a recession in the next year is greater than 50%, attributing the risk to tightening financial conditions, declining real wages, and a market bubble driven by investors rather than technology.
Market Bubble and Tightening Conditions
Speaking on CNBC, Rosenberg warned of building momentum in current market narratives. “I believe that we are in a bubble,” Rosenberg said, clarifying that “the bubble is never in the technology, but it’s in investor behavior.”
He noted that market stresses typically originate in the credit market. Rosenberg highlighted that broader financial conditions—including the dollar, credit spreads, equity and debt cost of capital, and the general level of interest rates—have “tightened 140 basis points just in the past three months.”
When asked directly to make a call on an impending economic downturn, Rosenberg said, “I put the odds of recession at over 50-50, and I’ll leave it at that.”
Inflation and the Labor Market
Rosenberg’s comments coincided with the release of the September 2026 Consumer Price Index (CPI) report, which showed the all-items index increased 0.6% over the month and 3.7% over the last 12 months.
Rosenberg called the data “not a good CPI number,” while pointing to a 0.5% monthly decline in real average hourly earnings, arguing that price shocks were "hitting a wall" in the labor market.
He warned that this dynamic will result in “negative real wages,” which will sequentially lead to “negative real consumer spending.”
Federal Reserve Policy and Recession Risks
According to Rosenberg, current inflation is not a “homegrown demand-led” issue, and the economy is not in a state where the Federal Reserve “can just adjust the temperature and get to a soft landing.”
He cautioned that the Federal Reserve’s ongoing tightening policy to fight a supply shock “won’t be able to do that without generating recession,” an outcome he believes is not currently on the market’s mind.
How Has the Stock Market Performed?
The S&P 500 index has advanced 12.76% year-to-date. Similarly, the Nasdaq Composite index is up 17.63%, and the Dow Jones gained 7.4% YTD.
On Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed lower. SPY fell 1.08% to $769.60, while QQQ declined 1.97% to $728.95. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.11% lower at $515.63.
In premarket trading on Thursday, SPY was down 0.22%, QQQ fell 1.02%, and DIA rose by 0.35%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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