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Canada vs. America: Which Economy Is In Worse Shape | David Rosenberg

Jimmy Connor Sep 5, 2026 42:30

Summary

Rosenberg argues the 2026 Treasury yield surge reflects a Fed policy reset, not fiscal or inflation worries.

Despite Kevin Warsh's hawkish tone, Rosenberg doubts the Fed will hike rates mid-September; Powell and other dissenters are likely to push back.

Energy at $90+ oil is acting as a tax on US consumers; combined with a no-hire, no-fire labor market, consumer-led recession odds are rising.

Carney deserves credit for fast-tracking six resource projects at the federal level, but high corporate taxes continue to drive Canadian investment abroad.

Rosenberg Research launches the ROSY ETF on September 9 with Corton Capital, a global multi-strategy fund uncorrelated to major equity indices.

David Rosenberg's takeaways

  • Top takeaway Rosenberg's central thesis is that the 2026 run-up in Treasury yields is driven by a reset in Fed policy expectations under Kevin Warsh — worth roughly 60 bps on the 10-year — not by fiscal deficits or inflation expectations, which TIPS still anchor near 2.3%.
  • He calls the US fiscal trajectory unsustainable: $40T public debt, a budget deficit at 5–6% of GDP for the longest consecutive stretch since the 1930s, and no political appetite for restraint, with immigration and labor-force declines undermining any 'grow out of it' path.
  • Rosenberg predicts the US will follow Canada's 1990s template and wait for a crisis — likely a failed Treasury auction — to force fiscal reform, and recommends gold as a hedge against that scenario.
  • On the US labor market, he says year-over-year non-farm payroll growth is 'basically zero' and household employment is negative, calling it a 'no-hire, no-fire' environment the Fed mislabels as stable.
  • He flags a consumer-led recession risk: real personal incomes are flat, US consumer spending is sustained only by an equity wealth effect on the high end, and an oil and diesel shock could push real incomes negative.

Mark Carney's takeaways

  • Top takeaway Rosenberg gives Carney a 'failing grade' on tax policy, citing Canada's 26.5% blended corporate tax rate versus the US's 21% and calling Canada 'tax uncompetitive' for fueling net direct-investment outflows over the past decade.
  • He argues Carney's Liberal Party will not cut corporate taxes politically, even though he says such cuts would underpin profits, job creation, and end decades of private-sector capital-stock stagnation.
  • Rosenberg credits Carney with progress on the resource sector: six mines approved or permitted at the federal level under his leadership, compared with 15 under Justin Trudeau, plus work with Alberta to push pipelines forward and inter-provincial cooperation.
  • He notes early signs of success in diversifying Canadian exports away from the US, with Rosenberg Research writing a report on this.
  • Carney is organizing a Canada Investment Summit in Toronto with global asset managers and corporates, which Rosenberg hopes will surface tax-competitiveness concerns.

Kevin Warsh's takeaways

  • Top takeaway Rosenberg calls Warsh 'the worst-led Fed' and blames his hawkish pivot for two-thirds of the post-mid-June run-up in Treasury yields, which concentrated on three days when Warsh spoke publicly.
  • He says Warsh's Jackson Hole tone — citing that over half the components of the price indexes he personally distrusts are rising above 3% — shifted Fed futures odds of a mid-September hike from 30% to 60% in a single day.
  • Rosenberg notes Warsh has established a task force on inflation because he does not trust official CPI or PCE deflator numbers, with a 'new and improved' price indicator promised by year-end.
  • He doubts Warsh can deliver a hike, saying Powell, Waller, and Williams are unlikely to vote for one and Warsh already faces three dissenters.
  • He frames Warsh's hawkishness as a familiar new-chair pattern of 'solidifying inflation credentials' — comparable to Greenspan in 1987 — and expects markets to ultimately see through the rhetoric.