By Rita Nazareth and Ken Prewitt
Jan. 26 (Bloomberg) -- Investors should favor shares of companies that depend less on economic growth because U.S. equities are expensive after the biggest rally since the Great Depression, economist David Rosenberg said.
“We have a market that is highly overvalued,” Rosenberg said today in an interview on Bloomberg Radio. “We have more sellers than buyers. 2010 will be a reversal from what we saw in 2009, when there was overwhelming complacency.”
Rosenberg, the chief economist at Gluskin Sheff & Associates Inc. in Toronto, said investors should shift their focus to producers of consumer staples, health-care companies, utilities and phone companies following the advance by the Standard & Poor’s 500 Index. The stock measure has surged 62 percent since March 9, driving its price-earnings ratio using the past year of profit to as high as 25 last month, the highest level since 2002, according to data compiled by Bloomberg.
“We’re going to have enough economic disappointment this year,” said Rosenberg, the former chief North American economist at New York-based Merrill Lynch & Co., the brokerage bought by Bank of America Corp. a year ago.
Consumer spending, which accounts for about 70 percent of the economy, probably increased at a 1.8 percent annual rate in the fourth quarter after rising at a 2.8 percent pace in the previous three months, economists said before a Jan. 29 report from the Commerce Department. The jobless rate held at 10 percent in December, near a 26-year high, the Labor Department said Jan. 8.
Rosenberg’s predictions have had mixed results. He was among the first to warn of 2008’s recession. In May he said the S&P 500 could fall beneath the 676.53 reached on March 9 because consumer spending hasn’t recovered. The index rallied instead.
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