PodcastMacro VoicesDavid Rosenberg

MacroVoices #552 David Rosenberg: Navigating The Noise

David Rosenberg sees the prospect of post-midterm gridlock and fading fiscal support as forces that could cool growth, inflation, and bond yields, while arguing that wage transmission—not a temporary tariff or energy shock—is key to persistent inflation. He also points to Treasury issuance and hyperscaler borrowing as important influences on rates. Market discussion highlights fragile equity breadth, crowded Nasdaq positioning, and bond-market pressure, alongside gold’s sensitivity to real rates and the dollar. Later trade-desk views outline conditional risks and opportunities across equities, currencies, oil, and gold.

Economic GrowthInflationInterest RatesFiscal PolicyMarket BreadthGold

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Key Takeaways

Rosenberg expects a Democratic House victory after the November 3 midterms to bring fiscal and policy gridlock, and cites an 80% historical pattern of slower growth, lower inflation, and declining bond yields after a shift to divided government. He argues that the temporary fiscal boost from the One Big Beautiful Bill should not be extrapolated and expects stimulus to end after the midterms, while the host says near-record stock prices and low volatility may understate election risk.

Rosenberg argues that tariffs have produced only a temporary inflation bump: core goods CPI slowed from 1.5% to below 0.7% year over year, and he says price shocks are less likely to persist without feeding into wages. He also points to decelerating wage growth, weak residential rents in an overbuilt apartment market, and an ADP gain of 90,000 that did not accelerate wages as disinflationary signals; he expects energy prices to peak, which could ease inflation momentum even if fuel prices remain elevated.

Rosenberg says rising real rates partly reflect capital demand from hyperscalers, three of the four largest of which have turned net free-cash-flow negative and are borrowing in bond markets. He also argues Treasury can influence the yield curve by changing issuance maturities, citing a 100-basis-point 10-year rally in 2023 after an issuance shift and saying reduced long-dated issuance in the November 4 funding announcement could reshape the curve again.

Markets have repriced from expecting a couple of Fed rate cuts to pricing four more hikes, and Rosenberg says Warsh's remarks have lifted the 10-year yield by six or seven basis points when he speaks; he nevertheless does not expect four hikes and has begun buying two-year notes. Rosenberg also cites the historical tendency for new Fed chairs to raise rates at their first opportunity, while reporting that the 10-year yield moved above 5.30% and the 30-year above 5.60% amid continued bond losses and no stabilizing central-bank catalyst.

GEO-POLITICS

Midterm Gridlock — Rosenberg expects a Democratic House victory to bring fiscal and policy gridlock after the November 3 midterms. Prediction polls also put Democrats’ chance of taking the Senate above 50%. Separately, the host argues that stocks near all-time highs and low volatility leave election uncertainty underappreciated. Rosenberg points to past market reactions to unified and divided government, including a major bond rally after the 1994 shift to divided government.

“There's two dates we should circle on the calendar. One is November 3rd. That's the midterms. And it looks as though the Democrats take the House…”—

ECONOMY

Tariff Pass-Through — Rosenberg argues tariffs caused a temporary inflation bump, not a lasting increase in core goods prices. Core goods CPI slowed from 1.5% year over year a year earlier to below 0.7%, a four-year low. He sees this as evidence that tariff pass-through did not persist.

“And what's interesting is that a year ago, the year-over-year trend in the core good CPI was running at 1 and a.5%. Today, it's running below 0.7%…”—

Wage Transmission — Rosenberg argues energy or tariff price shocks are less likely to drive persistent inflation unless they feed into wages; without that transmission, they can instead weigh on real consumer demand. He cites John Williams’s assessment that price shocks are not entering wages and says nominal wage growth is decelerating. Rosenberg estimates labor at 30% of retail costs, versus an approximately 5% inflation impulse from diesel-related transportation and freight. He will look for wage trends and collective-bargaining agreements to accelerate before changing his view.

“Prices have to feed into wages because if the price shock doesn't feed into wages, it hits the wall in the labor market and all you end up with is…”—

Hyperscaler Financing — Rosenberg says rising real rates partly reflect greater capital demand as hyperscalers increase capital-spending commitments. Three of the four largest hyperscalers have become net free-cash-flow negative and are turning to bond markets. That adds corporate credit demand competing with government borrowing.

“The first of course is the fact that we have these hyperscalers dramatically increasing their capex commitments and now three of the biggest of the four are now net free…”—

MARKETS

Diesel Supply Risk — The host flags a potential supply-side inflation risk if refinery damage persists: crude oil could remain available while diesel production is constrained. Damaged refineries can take years to rebuild, limiting price relief in finished products.

“But what we need is finished products. And when they blow refineries up, a lot of them around the world, we didn't have enough of those already…”—

Hawkish Repricing — Rosenberg says markets are reading Fed Chair Warsh’s remarks as hawkish, with the 10-year Treasury yield rising six or seven basis points when he speaks. Treasury pricing shifted from expectations of a couple of rate cuts to pricing in four more rate hikes.

“And so the market is reading every syllable as hawkish. I mean if you noticed whenever Wars opens his mouth the 10ear yield goes up six or seven basis points…”—

Treasury Supply — Rosenberg says a change in Treasury issuance across the curve preceded a 100-basis-point rally in the 10-year note in barely more than two months in 2023. He suggests Scott Bessent could take a similar supply-side approach after a comparable rise in yields.

“Okay, this is the fall of 2023. Out of the blue, 100 basis point rally in the 10-year note in barely more than two months. Why?…”—

FORECASTS

Energy Inflation — Rosenberg expects energy prices to peak, arguing that inflation momentum can fade even if gasoline and diesel remain elevated or ease only modestly. He distinguishes slower inflation from an outright reversal in energy prices: a peak alone would stop the upward momentum.

“So I think that the relief won't come from prices coming down significantly. They'll stay elevated. But remember that inflation is not a level. Inflation is a rate of change…”—

Gridlock Pattern — Rosenberg cites a historical pattern in which, 80% of the time after a shift from one-party power to a gridlocked two-party system, the economy slows, inflation falls, and bond yields decline. He says he would take those odds over the two years between the midterms and the 2028 election.

“People not realize that 80% of the time historically when a one party power after a national election swings to a two-party system with gridlock, 80% of the time the…”—

Treasury Curve Shift — Rosenberg says the November 4 Treasury funding announcement could materially affect the yield curve if long-dated issuance is reduced, reshaping the curve without a formal Operation Twist. He cites fall 2023 as a precedent and says a repeat could occur.

“When I speak in front of a group of people and ask them if they can tell me what November the 4th is going to be, why it's important, everybody…”—

Macro Voices Housekeeping

Eric Townsend discusses future Unplugged bonus episodes, listener-submitted questions, and the show's target length for its regular interviews.

Inflation And Tariff Pass-Through

Rosenberg argues that tariff fears have not produced persistent core-goods inflation and questions whether an energy shock alone can create lasting inflation.

Energy Shocks And Wages

Rosenberg expects energy prices to remain elevated but says persistent inflation depends on whether price shocks transmit into wages and consumer demand.

Treasury Yields And Fed Regime

Rosenberg attributes higher real yields to hyperscaler borrowing and a hawkish repricing of Fed policy, while criticizing the new chair's unclear framework.

Fed Messaging And Bond Positioning

Rosenberg says markets interpret the Fed chair as hawkish, leaving investors crowded into short Treasury positions and confused about policy direction.

Midterms And Fiscal Gridlock

Rosenberg expects a possible post-midterm split government to end recent fiscal stimulus, historically cooling growth, inflation, and bond yields.

Treasury Issuance And Yields

Rosenberg highlights the November Treasury funding announcement, arguing that shifting issuance toward bills and away from long maturities could pull down yields.

Election Outcomes And Markets

The speakers compare past unified and divided governments, with Rosenberg arguing that fiscal gridlock may help bonds and cool an overheated economy.

AI Competition And Disinflation

Rosenberg sees open-source Chinese AI as a potential competitive and disinflationary force, and says markets are overlooking weakness in housing and broad equities.

Gold, Real Rates, And Reserves

Rosenberg views gold's decline as a correction driven by higher real rates and a stronger dollar, while central-bank diversification remains the long-term bullish driver.

Rosenberg ETF And New Book

Rosenberg describes his book's market lessons and explains how his diversified research-based portfolio became a Canadian-listed ETF, with a U.S. listing in progress.

S&P 500 Put Hedge

The trade desk proposes a January S&P 500 put as defined-risk protection against a possible broad equity correction amid fragile breadth and upcoming catalysts.

Bond Selloff And Equity Breadth

The trade desk sees accelerating Treasury pressure and weak equity internals beneath resilient mega-cap indexes, while watching for a volatility-driven selloff or rebound.

Dollar Strength And Oil

The desk sees the dollar benefiting from widening rate differentials and Europe's energy exposure, while oil awaits developments around supply flows and conflict.

Gold Weakness And Nasdaq Crowding

The desk expects gold to consolidate under pressure from real rates and the dollar, while unusually bullish Nasdaq positioning raises concerns about crowded exposure.

Trade Desk Sign-Off

The trade desk wraps up its weekly market discussion and reminds listeners about the Big Picture Trading trial and the show's closing disclosures.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

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