Long-time market bear David Rosenberg is warning investors the stock market and bitcoin are massive bubbles.
The economist and strategist cites crowded trades amid a struggling economic backdrop for his concerns.
"Based on our [stock market] valuation work, we are anywhere from 20% to 30% overvalued based on a whole bunch of different metrics," the Rosenberg Research president told CNBC's "Trading Nation" last week.
Rosenberg, who served as Merrill Lynch's top North American economist from 2002 to 2009, is known for his pessimism over the past several years. In 2019, he told investors a recession was virtually unavoidable.
He toned down his market negativity last Spring on "Trading Nation" — asserting he didn't hate stocks because the Federal Reserve's unprecedented support could last for years. The key right now, according to Rosenberg, is to be vigilant.
'Probably not going to burst any time soon'
"What's holding the boot together is basically zero interest rates. As long as rates remain where they are, unless we have a real dramatic pullback in economic activity, this bubble that we're in is probably not going to burst any time soon," he said. "We have to understand though we are investing in a bubble."
The major indexes are starting 2021 in record territory. The S&P 500 and Dow closed at all-time highs on Thursday, surging 16.3% and 7.3%, respectively, over the past year. The tech heavy Nasdaq missed a new record high by a hair, but had its best year since 2009 — up almost 44%.
Rosenberg is also avoiding bitcoin, which also just completed a monster run. It crossed $30,000 for the first time over the weekend and closed 2020 at record highs. The cryptocurrency jumped 305% this year, for its best annual performance since 2017.
"The parabolic move in bitcoin in such a short time period, I would say for any security, is highly abnormal," said Rosenberg, who considers it the biggest market bubble right now.
For the next 12 months, Rosenberg plans to avoid last year's winners. His top strategy include laggards utilities and energy.
"What I want to do actually in the context of this bubbly stock market is invest in the areas that are not bubbly and that have a lot of catch-up potential," he said. "They do exist."
But there is an exception: Gold, which just completed its best year in a decade. Rosenberg views it as a safe haven asset.
"It has 1/5 of the volatility that bitcoin does," Rosenberg said. "I've been very bullish on gold, and I remain bullish on gold."
The precious metal ended the year at $1,895.10 an ounce, a fraction of a percent below all-time highs.
Disclosure: David Rosenberg is in the process of buying SPX puts. He owns energy and pipelines (utilities) and gold.
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