The biggest risk to the ongoing bull market is widening credit spreads, Rosenberg tells CNBC. A credit spread is the difference in yield between a US Treasury bond and another bond with the same maturity, but a lower credit rating. If spreads widen, it means investors want more compensation for the risk of lending to a company rather than to the US government. “The corporate-bond market is today’s bubble,” says Rosenberg – it’s just a matter of time before it blows up.
“Something tells me in the next six months that we’re going to have a dramatic widening in credit spreads.” Investors should remember that liquidity (ease of buying and selling) tends to dry up in a bear market – so avoid being invested in anything that’s too exotic or obscure to get out of in a hurry. “Late cycle, liquidity starts to matter a lot more than earnings do.”