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American hedge fund manager Stanley Druckenmiller believes that “we’re six months into a bear market,” adding that it’s very likely that the current bear market “has a ways to run,” he said Thursday at the 2022 Sohn Investment Conference
With the Nasdaq Composite Index plunging over 20% from its earlier high and the S&P 500 down more than 16% since the start of the year, Druckenmiller thinks that the economy is likely to fall into recession sometime next year after the Federal Reserve turned even more hawkish in its fight against inflation, which could lead to further losses.
Last year, the investor criticized the Fed’s bank policy, citing a “raging mania” in every market.
“That period was incredibly costly because a lot of assets were purchased during that period that a lot of people moving out the risk curve will lose a lot of money on,” said Druckenmiller then.
During the same conference, Greenlight Capital president and founder David Einhorn argued that the record-high current inflation is likely to stay, partly due to a lack of investments in housing, mining, oil, paper, and cement.
Druckenmiller said he has been betting against stocks and fixed income and instead invested in core commodities including gold, oil, and copper, among others. The former chairman and president of Duquesne Capital said the hedge fund exited positions in Alphabet (NASDAQ:GOOGL), Airbnb (NASDAQ:ABNB), and Carvana (NYSE:CVNA) in the first quarter while increasing his exposure to Chevron Corp. (NYSE:CVX)
On the other hand, Druckenmiller thinks that bonds are unlikely to endure the downturn as was the case in the past because US Treasury yields are significantly below inflation. For his future investing plans, Druckenmiller said he expects to short stocks again in the future and is looking to bet against the US dollar.
“If you’re predicting a soft landing, it’s going against decades of history,” he said.
