The only justification for U.S. equities to be priced at their current levels is that a major medical breakthrough to defeat the pandemic is coming sooner than later, according to David Rosenberg, who runs his own independent research firm in Toronto. Even if that happens, the economic damage inflicted by Covid-19 could take years to heal.

The equity markets are "displaying a level of hubris that is as amusing as it is disconcerting," he observed. A retesting of the March lows is likely in his opinion.

Every Thursday the new unemployment claims are announced. Over the past seven Thursdays, 33 million Americans have filed for unemployment. What has the stock market done? The Dow has risen a collective 2,000 points on those seven days.

Rosenberg is hardly the only market observer asking what planet the stock market is living on. A day after he spoke, hedge fund manager Stanley Druckenmiller said the risk-return, trade-offs for equities are about the least attractive of his lifetime. Stocks are down only about 11% from their February highs, and it is obvious the world is a lot more than 10% messed up.

Speaking for the 11th time at John Mauldin's Strategic Investment Conference, Rosenberg ticked off a litany of economic statistics illustrating the magnitude of the downturn. His presentation was entitled “The Great Repression: Business Will Not Be As Usual.”

In recent years, Mauldin has repeatedly tapped Rosie, as conference attendees know the former chief North American economist for Merrill Lynch, as the opening speaker. As he began his talk, Rosenberg began by urging virtual attendees to sit back and have a drink or two. It was only 11:00 a.m.

This time he opted not to include any charts in the presentation, since they'd probably be out of date within days. Rosenberg conceded that his confidence in anyone's predictions, including his own, were "several standard deviations below the norm."

Second-quarter U.S. GDP could be down as much as 50% as the hole keeps getting bigger and bigger. That would mean it has to surge 100% just to return to normal, he added.

Last Friday, it was announced that about 20 million Americans lost their jobs in April, taking the unemployment rate to 14.7%. Rosenberg believes the real number is about 20%—a view shared by some Trump administration officials—and could approach 30% in the next few months. What did the Dow do? It jumped 455 points.

"It's surreal," Rosenberg said. "Either the investment community thinks the Fed will go beyond [investing] in the high-yield market and buy stocks or they think it [the virus disruption] is all temporary." Most medical experts believe it will be at least one year before a vaccine is widely available.

Only a few years ago, Rosenberg said he would make jokes about the Fed buying junk bonds to prop up markets. Now it looks like the joke was on him. "[Fed chairman] Powell is as much of a backstopper and market manipulator as Greenspan and Bernanke," he noted.

The massive amount of government spending are not FDR-style fiscal stimulus projects that gave America the Golden Gate Bridge, the Hoover Dam or the Lincoln Tunnel. Instead, Rosenberg called the PPP and the other latest bailout creations nothing but a bridge to financial life support for tens of millions.

According to Bureau of Labor Statistics' (BLS) surveys, about 75% of the newly jobless expect their job losses to be temporary. Rosenberg called that "wishful thinking." But even if they are right, and let's hope they are, that still leaves as many as 9 million people who have seen their jobs permanently eliminated. All this comes at the start of a decade when many futurists feared the advent of exponential technologies like artificial intelligence and robotics would displace tens of millions of jobs.

The saddest aspect of the whole fiasco is that the winners are people in technology and health care, who were just doing fine. Most of the people who find themselves suddenly unemployed through no fault of their own worked in low-wage jobs like retailing and hospitality and can't afford extended unemployment.

But the carnage is widespread. Rosenberg noted that state and municipal government accounts for $2 trillion in GDP and 1 million workers in this sector are now unemployed. Professionals and others in dentistry account for more than 900,000 jobs and more than half are temporarily sidelined.

Much of America is reopening for business this week. Does Wall Street really believe any material number of Americans are going to go out and spend like they were three months ago?

Rosenberg ridiculed that as a delusional notion. He cited numerous surveys finding that 85% of Americans wouldn't get on an airplane. Another survey found only 22% saying they would go to a bar or restaurant. Only 56% say they feel comfortable going to a supermarket. That's "good for the delivery business, but not much else," he observed.

Another survey found that 59% of Americans plan to remain on lockdown until the virus is contained. As for restaurants, who "wants to wear a mask while they chew their food," he quipped. The financial dynamics for restaurant owners forced to operate at 50% capacity simply don't translate into profitability. Other small business owners worry they could become victims to a pandemic of lawsuits.

Then there is the political climate and the question of who is going to pay for this explosively expensive crisis. "It is crystal clear to me it will be capital, not labor," that is expected to pay the freight. Ordinary people probably will be totally tapped out when the bill comes due so that the only alternative will be to tax the wealthy and corporations.

There is going to be a rising tide of nationalism, isolationism, anti-globalization and, in all likelihood, socialism when the world starts to get back on its feet, Rosenberg suggested. Given this environment, he believes gold should turn out to be a safe haven.

Rosenberg made one or two concessions to equities. He acknowledged that they are a long duration asset.

This comes at a time when some serious investors are questioning the value of quarterly earnings' reports and guidance. To some, short-term earnings guidance is little more than a suckers' game. Right now it seems meaningless.

But that's not where this asset class's value lies. Indeed, Wharton School Of Finance professor Jeremy Siegel reportedly estimates that 90% of the value of equities resides in the earnings a company produces starting 12 months out from the present.

And there are clearcut winners emerging from what Rosenberg considers a depression. "Microsoft has become a utility," he said. "One could say Google and Amazon are becoming utilities."

He also added that indexes and other strategies focused on dividend aristocrats are viable options. When looking for income, investors should focus "on the stability of the dividend, not the yield," he advised.