Rosenberg: US Certain to Slip into Double-Dip Recession

Friday, 13 Aug 2010 01:40 PM
By: Dan Weil

The U.S. economy is nearly certain to slip back into a double-dip recession, says David Rosenberg, chief economist at Gluskin Sheff.

"The risks of a double-dip recession — if we ever got out of the first one — are actually a lot higher than people are talking about right now," he told CNBC. "I think that it's almost a foregone conclusion, a virtual certainty."

Meanwhile, the recent surge in bond prices doesn’t bode well for the stock market, he also told CNBC.

The 10-year Treasury yield has plunged to a 14-month low beneath 2.70 percent, a far cry from the 4.01 percent high on April 5.

"Declines of this magnitude very often presage the onset of bear markets and recessions," Rosenberg wrote in a commentary obtained by CNBC.

"Typically, equities and then economists are late to the game. . . . What is key to note is that the bond market is the tail that wags the stock market's dog — it leads."

The reason why bonds and stocks can go in opposite directions now is that the current rally in corporate bonds stems from the strength of corporate balance sheets, while stocks take their cues from corporate profits, Rosenberg says.

And “corporate profits, benchmarked against investor expectations, are probably going to disappoint,â€