Brace for a recession by September, a 20% plunge in the S&P 500, and a painful credit crunch, top economist David Rosenberg says

• David Rosenberg sees a near-term recession, a 20% hit to stocks, and a damaging credit crunch.
• The economist panned the Fed for hiking interest rates too much, and said they could hit zero again.
• Rosenberg noted that recessions present great buying opportunities for brave investors.

US investors should expect a painful recession by September, a 20% plunge in the S&P 500, and a dangerous credit crunch, David Rosenberg has warned.

The Rosenberg Research president blasted the Federal Reserve for hiking interest rates too aggressively, and suggested the US central bank could slash them to zero again. He also noted that economic downturns can be a boon for bargain hunters.

The former chief North American economist at Merrill Lynch made the comments during a recent Blockworks Macro interview.

Here are Rosenberg's 9 best quotes, lightly edited for length and clarity:

1. "Adult males were sitting on the couch, playing with their Reddit accounts and thinking they had a golden goose between crypto and the stock market, that they could retire early on. Well that great retirement theme has been retired." (Rosenberg was discussing the boom in day trading and asset prices during the pandemic.)

2. "A recession is a very big call because it's a haircut to national income. It's as if the whole country takes a pay cut. It's not that we take the Lamborghini from 80 down to 20. It's that we go in reverse."

3. "It was like the Energizer Bunny, it gave us a little bit more juice. But to say that we're not going to have a recession because of lagged impacts of fiscal stimulus from two years ago is ridiculous. The leading indicators are telling me that the recession is actually starting this quarter or next quarter. It's certainly not a 2024 story."

4. "I'm bearish on equities. I don't like the valuations, I don't think a recession is fully priced in." (Rosenberg suggested S&P 500 earnings could drop by a fifth in a recession, tanking the index by 20% to about 3,200 points.)

5. "It will be painful if you're long. But if you have the dry powder and the liquidity, you'll be able to pick up assets at better levels. The beauty of recessions is that they cleanse, and they move assets from weak hands to strong hands."

6. "Banks are already becoming a lot more cautious with their lending. We have layered this on top of the lagged impact of all the rate increases, and the impact that has on the housing market and on debt-servicing capacity. Now we have not just the cost of credit being a problem for the economy, but the availability of credit is going to compound that. It's very difficult right now to gauge how deep this is likely to be."

7. "Everything they've done since the fall has been overkill. It's going to be too late by the time they realize all the damage they've done. The economy is going to be in recession, inflation is going to be falling like a stone." (Rosenberg was criticizing the Fed for forging ahead with rate hikes despite growing evidence of waning inflation.)

8. "I don't think there are enough rate cuts priced in for next year. There's a serious risk we're going back down to the zero bound in a recession that ends up destroying demand and causing inflation to decline."

9. "The problem is they've become a bunch of rock stars. There's not a TV camera they won't run in front of. Not even to say anything intelligent, but to talk about how they're going to cast their vote at the next meeting. I'd rather hear less from the Fed." (Rosenberg was complaining about the flood of public commentary from Fed officials in recent months.)

Read more: We put 7 burning questions to top economist David Rosenberg. Here's what he said about the outlook for stocks and house prices, and the threat of a recession.