David Rosenberg, one of Wall Street’s leading bears has turned more bullish, riling some longtime clients. “Cancel my account, and tell Dave I don’t recognize his work. He used to be the straightest shooter out there…it is too much for me to have another cheerleader.”

Top Bear’s Bullish Tilt Has Followers Growling

GREGORY ZUCKERMAN 

Oct. 20, 2013 9:07 p.m. ET

One of Wall Street’s leading bears has turned more bullish, riling some longtime clients. David Rosenberg, a former chief economist at Merrill Lynch & Co. who since 2009 has been chief economist and market strategist at Toronto money manager Gluskin Sheff & Associates Inc., GS.T +2.86% spent a decade warning about the fragile health of the U.S. economy, urging caution about stocks and recommending safe U.S. bonds.He maintained the stance even after the market rebounded following the financial crisis, often outdoing other noted market doomsayers. In the summer of 2010, when the benchmark 10-year U.S. Treasury note traded at around 3.5%, Mr. Rosenberg bet another noted bear, Marc Faber, that 10-year Treasury yields would drop below 2%, as bonds remained in demand and U.S. growth remained limp. Mr. Rosenberg collected on the bet, enjoying a bottle of 15-year-old Dalwhinnie Scotch whisky.

Sometimes Mr. Rosenberg’s dour stance led to backlash. In early 2012, as he outlined his bearish view at a conference of chief executives in New York, an American military veteran suddenly stood to interrupt Mr. Rosenberg with a spontaneous rendition of “The Star-Spangled Banner.” Mr. Rosenberg applauded the man’s patriotism.

Lately, though, Mr. Rosenberg has changed his tune, a rare turn for a Wall Street strategist with a large following and a high-profile market stance. This past spring, he upgraded his outlook for the U.S. economy, urging investors to buy more stocks and dump Treasury bonds, citing an improving labor market, among other things.

The shift has done nothing to quell the emotional response to Mr. Rosenberg’s commentary. The difference is that now he is being called a traitor by different investors—those unhappy with his more bullish stance.

“Cancel my account, and tell Dave I don’t recognize his work,” a reader wrote Mr. Rosenberg by email recently, one of the dozens of critical responses he had fielded. “He used to be the straightest shooter out there…it is too much for me to have another cheerleader.”

Mr. Rosenberg says another investor recently accused him of being a “turncoat.”

The reaction has been an eye-opener for Mr. Rosenberg, who in the summer of 2012 gave his followers an early indication that he might turn more bullish with a commentary titled “Parting of the Clouds?”

“I’m finding out that a lot of my loyal readers were never really interested in my analysis,” he said in an interview. “I spent over 10 years battling the reputation of being a radical permabear. Now I make a subtle shift and I’m fighting the perception that I’m a permabull,” or an analyst who maintains a positive stance in every market.

The reaction shows how difficult it is for Wall Street personalities to switch entrenched, public positions. In the past, prognosticators including the late Joseph Granville were criticized for holding bearish positions too long amid bull markets.

Others, including Goldman Sachs Group Inc. strategist Abby Joseph Cohen and former Morgan Stanley analyst Mary Meeker, caught flak for failing to moderate bullish views ahead of difficult markets.

“It’s tough in this business to change,” said David Kotok, chairman of Cumberland Advisors, an advisory firm in Sarasota, Fla., and a client of Mr. Rosenberg. “His clients should get over it,” said Mr. Kotok.

Mr. Rosenberg hardly has been telling investors to bet it all on stocks. He simply has toned down his usual caution, recommending that investors put just over half of their portfolios in stocks, up from about 35% in early 2012, while urging them to flee from bonds, which usually do well in difficult times.

Mr. Rosenberg switched to the more-bullish camp this year after he saw unemployment dropping, detected early signs of wage inflation and observed more workers leaving the workforce for reasons beyond their frustration over job prospects. He also viewed deflation as no longer a concern, as the Federal Reserve aggressively eased policy, and saw other signs of economic improvement for the U.S.

Mr. Rosenberg became more positive on stocks when he determined that chances of another economic downturn had dropped amid the Federal Reserve’s aggressive actions.

Even Mr. Rosenberg seems uncomfortable being identified with full-on economic optimism. Asked what U.S. growth will be next year, he hedges, saying, “There’s no thing such as a sure thing,” before concluding that “you can make a respectable case for 3% growth.”

That estimate, though not exactly a call for a boom, would put him at the high end of most economists’ predictions for the first time in about 15 years.

Mr. Rosenberg acquired a sizable fan following in nine years as a Merrill Lynch economist. He accurately predicted the troubles caused by lending that went overboard in the mid-2000s. He also warned of a recession in 2007 and of a housing bubble before it burst, though some began calling him a Cassandra for his consistently dour outlook.

Since 2009, Mr. Rosenberg has been at Gluskin Sheff, where several thousand subscribers receive his morning economic and markets analysis. He left Merrill to return to his home in Toronto, where his wife and three children have long lived even while he spent most of the week in New York for Merrill.

The move was seen as a coup for the firm, which paid Mr. Rosenberg nearly $2.9 million in compensation last year, a figure based in part on research revenue he generated for the firm. That made him Gluskin’s highest-paid employee, according to securities records.

At Gluskin, Mr. Rosenberg anticipated the current, weak economic recovery, though he also missed the massive rebound for stocks beginning in early 2009.

“He didn’t put enough faith in the Fed’s determination to push people along the risk curve” by embracing easy-money policies in hopes of sparking the stock market, said Henry Herrmann, chairman and chief executive at Waddell & Reed Financial Inc. “But he does marvelous work to bring light to dim subjects.”

That view hasn’t done much to shield Mr. Rosenberg from the recent complaints. Recently, a friend and loyal reader wrote him to lend support. But even he couldn’t help piling in with his own criticism.

“I do think it could be hazardous to your reputational health to turn bullish at this time,” the friend wrote.