The history of Fed tightening cycles isn’t particularly encouraging either. Rosenberg said 11 of the past 14 tightening cycles ended in recessions. What’s different this time is not the low level of interest rates but rather the rate of change, which is dramatic.
For stock market investors, the good news is that equities already are down 13%. Recessions, on average, take stocks down 30% and Rosenberg added that if the S&P 500 were to hit 3,550, “I’d get interested.”
Nonetheless, he warned attendees at the SIC conference to be “extremely cautious.”
Among the investments that perform well as the economy enters a recession are U.S. Treasurys, gold, the U.S. dollar and dividend-paying, non-cyclical stocks.
It may be counter-intuitive, but Rosenberg said that even in periods of recession and elevated inflation, "there is a rally in Treasurys.”