Investing around the latest Trump news? Don't, says David Rosenberg
As U.S. stock markets continue to touch new highs, one of Canada’s most influential economists worries the outsized performance of a handful of stocks is masking a broader weakness.
“Healthy markets are characterized by markets that are broad in nature and markets about to weaken are characterized by what we are seeing right now – when the strength is limited to a handful of blue chip stocks,” David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates told BNN.
“The reality of the situation is that the average S&P500 stock is down nearly 10 per cent from its 52-week high. The average stock is down six per cent and the equal weighted S&P has not made a new high since March the first,” he said.
As the bull market enters its ninth year and with stock valuations hitting their highest level in 15 years, Rosenberg worries too many managers are pouring money into leveraged exchange traded funds in an effort to boost their returns.
“Where is the bubble?” he said. “The bubble is in passive investing, the bubble is in these leveraged ETFs and ultimately that’s what these passive funds are buying to keep up with the overall market.”
Rosenberg argues that many stocks have already begun to correct and investors should look to take profits increase their exposure to other sectors – including Canadian energy stocks which could see a boost from recent production cuts.
“(It’s) perfectly prudent to be starting to take a look at taking some profits from your winners and looking at investing some of them in some of the laggards and Canadian energy fits that bill,” said Rosenberg.