Top strategist David Rosenberg warns of a massive market bubble that could pop this year — and makes a contrarian call to buy Treasury bonds

• David Rosenberg warned of sprawling asset bubbles and predicted a painful correction.
• The Rosenberg Research boss suggested tighter monetary and fiscal policies could fuel deflation.
• Rosenberg said US households have overinvested in stocks, and suggested buying Treasury bonds.

Veteran strategist David Rosenberg diagnosed a historic bubble in asset prices, predicted a market correction, and raised the prospect of deflation during a RealVision interview released on January 10.

The Rosenberg Research president warned that US households are overexposed to equities, made the case for buying government bonds, and listed several sectors where investors can earn a yield on their money if stocks fall.

Here are Rosenberg's eight best quotes from the interview, lightly edited and condensed for clarity:

1. "We have nutty, crazy, massive bubbles everywhere. In my professional lifetime, and probably going back further, I don't remember there being so many asset bubbles taking place at the same time." — Rosenberg highlighted US stocks, credit, and real estate as examples of bubbles.

2. "We've come off three years with an average 20% increase in the S&P 500. Normally, the stock market goes up in price by 7% per year. We have tripled what is normal three years in a row. It's caused people's brains to get all fuzzy, and the greed is egregious."

3. "The odds are high we're going to see a bear market sooner rather than later. Will it happen this year? I wouldn't be surprised." — Rosenberg asserted that tightening fiscal and monetary policies at a time of nosebleed valuations would likely cause a correction.

4. "It might be only three or four rate hikes before we start talking about recession pressures. That's going to undercut asset values, and then there will be a knock-on effect on aggregate demand. And that is going to create a future of disinflation or deflation."

5. "Inflation is going to be a lot lower. I'm talking about Japanification. I think inflation in the next three, five, 10 years is going to be a lot lower than 2% to 2.5%." — Rosenberg argued that the recent inflation spike is transitory, and the tapering of fiscal and monetary support, the recovery of global supply chains, and higher government debt would temper price increases.

6. "Households are up to their eyeballs in equity exposure at the peak of the cycle with the Fed about to raise rates. What do you think happens to household balance sheets, savings rates, consumer confidence, and spending if the stock market ends up correcting?" — The value of equities on US households' balance sheets has more than tripled to $43 trillion over the past decade, and the percentage of stocks in their asset mix has surged from 14% historically to 40% today, Rosenberg said.

7. "I'm very bullish on 30-year government bonds. Treasuries are a diversifier, they are inversely correlated with the equity market. They are one of the best insurance policies you could have. They are a ballast. They also offer certainty of payment, unlike equities, gold, or bitcoin. There is no default risk."

8. "I would be looking at pipelines, utilities, telecom, industrial REITs, even gold-mining stocks. I would also be taking profits in the US and applying them in emerging markets. — suggesting where investors can earn a yield if they pull their money out of riskier stocks.