Economist David Rosenberg believes that the bond market is getting inflation right and yields shouldn't be trading at higher levels.
His reasoning: inflation as a temporary phenomenon caused by enormous backlog and supply chain problems in connection with the coronavirus pandemic.
“The numbers were shocking upwards, no doubt about it. But it's pretty easy to explain, "the president of Rosenberg Research told CNBC's" Trading Nation "on Friday. "I don't see why people want to superimpose these last few months into the future."
So far, the bond market is shrugging off inflation. The benchmark 10-year Treasury Note yield hit its lowest level since March 3 on Friday, closing at 1.45%. The yield is down 7% in the last week and down almost 11% in the last month.
Falling yields have been on Rosenberg's radar for months.
At the end of February Rosenberg called the bond market "radically oversold" in the "Trading Nation" and forecast a decline in the 10-year yield to 1%. At that time the return was around 1.5%.
"The data is so noisy and skewed," says Rosenberg, who served as the top North American economist at Merrill Lynch from 2002 to 2009.
"I refuse to hyperventilate because of inflation."
In a note to investors on Friday, he wrote: "I refuse to hyperventilate because of inflation". He believes the other side of the rapid growth is a plateau.
"That's the story for the second half of the year … The bond market is sensing that right now," said Rosenberg. "My forecast is slower growth, inflation will peak and overturn, and the yield curve will bull flatten."
It is an outlook that would create trouble for reopening trading. Rosenberg predicts that consumer discretionary, much of them, will fall out of favor later this year.
"Growth should take back leadership over stock market value," he said. "They want to be more involved in defensive growth and in areas of the market that will benefit from lower bond yields."
Bitcoin outbreak is imminent?
Rosenberg may expect trouble for reopening trading, but he also believes Bitcoin is the best bet for a resurgence. The cryptocurrency has fallen 38% in the past two months.
He also wrote on Friday about encouraging signs showing that Bitcoin is preparing for "another shot to the top". He also suggested that technical data suggests that overbought conditions are dissipating.
However, he still won't fully embrace the asset.
"I don't have any Bitcoin. I didn't recommend anyone buy it. It seems to me that crypto will stay here. There is no doubt that it is a broker of a medium of exchange, ”he said. "Bitcoin is a speculative trade for me. I don't see it as a real investment."
Rosenberg prefers gold, an asset he has owned for years.
"I'm just saying buy the gold," said Rosenberg. "Gold has 1/5 the volatility of Bitcoin."
Gold is up 8% in the past two months. However, so far this year it's down about one percent.