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We’ll take $1tn on “things people say at the top of the cycle”, please Alex.

Mega forces are reshaping economies and their long-term trajectories — it’s no longer about short-term fluctuations in activity leading to expansion or recession. 2024 has reinforced our view that we are not in a business cycle: AI has been a major market driver, inflation fell without a growth slowdown and typical recession signals failed. Volatility surged and narratives flipflopped as markets kept viewing new data through a business cycle lens, not one of transformation.

That’s from BlackRock’s 2025 investment outlook, published yesterday. It’s not quite Gordon Brown bragging on the eve of the financial crisis that he’d eliminated boom and bust cycles, but there are uncanny echoes.

However, BlackRock gunna BlackRock. A large investment manager is never going to sound overly negative in its big annual outlook, when the whole point is to entice punters into the building. Or as BlackRock puts it:

This fundamentally different landscape upends the nature of investing, in our view. We think investors can find opportunities by tapping into the waves of transformation we see ahead in the real economy, with AI and the low-carbon transition requiring investment potentially on par with the Industrial Revolution.

What’s more noticeable is how many permabears are now throwing in the towel. Even Nouriel Roubini is sounding remarkably positive these days, and now David Rosenberg is publishing mea culpas (though he insists that this is not what it is).

Check it out:

The bottom line: One can reasonably debate whether the stock market has risen exponentially but there is no arguing that the surge in the S&P 500 these past two years has been nothing short of extraordinary. And it has clearly gone much further than I thought it would, especially in these past twelve months, and so at this point, it is worth the time and effort to discuss and interpret the message from the market; tip the hat to the bulls who have, after all, been on the right side of the trade, and provide some rationale behind this powerful surge. This is not some attempt at a mea culpa or a throwing in of any towel, as much as the lament of a bear who has come to grips with the premise that while the market has definitely been exuberant, it may not actually be altogether that irrational.

Rosenberg’s über-bear credentials have been well-established for several decades. He’s your favourite bearish analyst’s favourite bear. As recently as last month he was recommending people get into cash because he felt pretty much everything was overvalued. So Rosenberg’s shift is . . . interesting.

His whole argument is worth reading, as some of the thoughtful bearishness still lingers. For example, Rosenberg still reckons that there could be a correction sometime soon, perhaps triggered by a more hawkish Federal Reserve. But he thinks that the response will and should probably be to “buy the dip”.

This bit stood out for us, as FTAV never thought we’d hear Rosenberg unironically say anything like “this time is different”:

I do hate to ever use the term “new era” or “it’s different this time,” but we do not have a large sample size of data points historically on such major inflection points on the technology curve. But when they do occur, what you do find is what we have on our hands today, which, once again, is an investment community lengthening their investment horizons and rendering classic valuation metrics obsolete (at least for the environment we find ourselves in currently). That’s the major point.

This is the kind of stuff that mostly happens just before major market turns. Thankfully Albert Edwards is as resolutely gloomy as ever, because if he changes his mind all hell will probably break loose.