Juggling Dynamite

An insightful overview in this segment. Happy Friday!

Guy Adami and Dan Nathan host economist ⁠David Rosenberg⁠ of ⁠Rosenberg Research⁠ on the RiskReversal podcast to discuss the state of the market, economic conditions, and geopolitical factors. Rosenberg outlines the volatility seen in the S&P 500, emphasizing that recent market moves are sentiment and momentum-driven rather than based on fundamentals. He highlights concerns about a potential topping formation in the market and discusses the impact of tariff policies, the labor market, the housing market, and global geopolitical tensions, particularly around Israel and Iran. Rosenberg also shares his views on inflation, interest rates, and the potential for recession, suggesting that the economy may already be contracting. The discussion concludes with a focus on risks in the private equity and debt markets and the potential for pension funds to be the center of the next financial crisis. Here is a direct video link.

Stock bulls cite prices back near all-time highs as a self-fulfilling prophecy for financial resiliency. After rebounding 22% since the April 8 lows, the S&P 500 is now +3.5% year to date and .90% below its February high.

Another way to say this is that large-cap stocks have returned to extreme capital risk and overvaluation (S&P 500 forward PE of 22x, TSX 18.5x), while underperforming short-term Treasuries over the past seven months.

At the same time, since mid-January, as Treasury prices have quietly rallied, US 10-year yields are 48 basis points lower, while oil (WTI) remains -18% despite a steady stream of Middle East terror.

The June 18 peak for WTI was $75 per barrel and $120 in June 2022 following Russia’s invasion of Ukraine. The overarching factors remain a slowing global economy, accompanied by steadily rising total primary energy supply from fossil fuels, nuclear, and renewable sources (IEA’s Global Energy Review 2025).

Growth bulls further cite a historically low US unemployment rate of 4.2% as proof of happy days, even though unemployment, like the consumer price index, is one of the most lagging economic indicators. Less mentioned is that May’s labour force participation rate declined by 0.2 percentage points to 62.4%, matching February’s two-year low, while the employment-population ratio declined by 0.3 percentage points to 59.7%–the lowest level since January 2022. Canada’s job market is weaker than the US’s, despite the Bank of Canada having already lowered its policy rate from 5 to 2.75%.

US non-farm payrolls (NFP) are generally considered a coincident to slightly lagging economic indicator. As it turns out, over the past 12 months, non-farm payrolls have been consistently revised lower after initial better-than-expected announcements, by an average of 30,000 jobs per month.

Despite Fed Chair Jerome Powell’s insistence that the “solid” job market suggests financial easing is not required, economist Eric Basmajian explains the signal behind the inflated NFP noise in the segment below.

Current data suggests we are adding ~1.6 million jobs per year. The pace is likely closer to 1.25 million, a 20% difference. pic.twitter.com/ewtGLdMqHL

— Eric Basmajian (@EPBResearch) June 23, 2025

This video highlights the subtle cracks forming in the US labor market.  Here is a direct video link.

The trouble is that once the lagging data gets revised down to reality, and the US Fed starts cutting, it is generally too late for complacent masses to find shelter from financial harm.

In a sign of financial stress, an increasing number of homeowners are withdrawing equity from their homes for cash to pay down other high-interest consumer loans and credit cards. Debt consolidation is cited as the top reason for people taking out Home Equity Lines of Credit. See, Should you use your home equity to pay off credit-card debt? Read this before taking out a HELOC:

It’s a sluggish moment for homeowners who are trying to sell but a brisk one for those who want to tap into their home equity. After waning in popularity for about a decade, more consumers started turning to Home Equity Lines Of Credit (HELOC) around 2022, as home values surged. And if the Federal Reserve cuts interest rates this year, it could help broaden the appeal of these credit lines even more.

Americans racked up $1.18 trillion in credit-card debt as of the first quarter, with 172 million people carrying a balance on their cards. Households withdrew almost $25 billion through HELOCs during the first quarter of 2025, according to Intercontinental Exchange–the biggest first-quarter jump to open these lines of credit since 2008.

Credit cards with unpaid balances charged a crushing 21.91% average annual percentage rate in February, and personal loans averaged 11.66% interest, Federal Reserve data showed this month. Meanwhile, the average HELOC rate is currently 8.27%, according to Bankrate.