As President Donald Trump nears his first anniversary in office, he shouldn't be so quick to take credit for the economy's rapid growth, Gluskin Sheff's chief economist and strategist said.
"This is still the same rally that we've been in for the better part of the past eight or nine years, and it still has the Fed's thumbprints written all over it," David Rosenberg told CNBC's "Squawk Alley" on Tuesday.
Corporate tax cuts and sustained optimism continue to rally the economy, with the Dow Jones reaching record highs, topping 26,000, on Tuesday. The index rallied 280 base points just 12 days after passing 25,000 — the fastest 1,000-point rise in the index's 121-year history.
While Rosenberg did credit Trump's deregulation as helping to move the economy along, he said the increased confidence and seemingly never-ending rally are more the result of policies put in place before Trump took office and of the Federal Reserve.
"We know the history of the Fed," he said. "They are responsible for this."
Recalling the housing bubble of the early 2000s, Rosenberg said the Fed didn't start to raise interest rates until June 2004, "late in the game."
"By that time they had already created the housing and credit bubble," he said. "They never got ahead of it."
"At some point, I think, the Fed will take the punch bowl away as it normally does," Rosenberg said. He pointed out the Fed is responsible for setting the pace of economic growth and needs to raise interest rates when the economy reaches peak activity to prevent a recession.
With the increased stimulus in the near future, the new tax plan slashed corporate tax rates from 35 percent to 21 percent, and as the unemployment rate continues to hover around 4 percent, Rosenberg warned the Fed shouldn't "sit idly" with "late cycle activity screaming everywhere."
"Somehow the Fed is just going to continue to do dribs and drabs in the face of deficit-financed tax stimulus in the ninth year of the expansion," he said. "That to me is the primary risk. The elephant in the room is always the Fed."