We’re in a ‘raging mania’ and the subsequent few years shall be difficult
“Everyone loves a celebration … however, inevitably, after an enormous occasion there is a hangover,” the billionaire CEO of the Duquesne Household Workplace mentioned in a “Squawk Field” interview. “Proper now, we’re in an absolute raging mania. We have commentators encouraging corporations to do inventory splits. Corporations then go up 50%, 30%, 40% on inventory splits. That brings no worth, however the shares go up.”
Tesla shares rallied 82.5% from Aug. 11 — when the corporate introduced a 5-for-1 inventory cut up — to Aug. 31, when the cut up took impact. Apple jumped 34.2% between July 30 and Aug. 31 on information of a 4-for-1 inventory cut up. The inventory has fallen greater than 12% because the cut up took impact.
The S&P 500 is up greater than 51% after hitting an intraday low on March 23. Final week, the broader-market index hit an all-time excessive earlier than a rollover in tech shares knocked it again under that stage.
“I’ve no clue the place the market goes to go within the close to time period. I do not know whether or not it should go up 10%; I do not know whether or not it should go down 10%,” Druckenmiller mentioned. “However I might say the subsequent three to 5 years are going to be very, very difficult.”
This huge market rally is due largely to the measures taken up by the Fed because the pandemic started, Druckenmiller mentioned. He famous that, whereas the central financial institution did a “nice job” in March by slicing charges and launching unprecedented stimulus applications to maintain the financial system, the follow-up market rally “has been extreme.” He additionally mentioned that for the primary time shortly, he’s fearful about inflation taking pictures larger.
“The merging of the Fed and the Treasury, which is successfully what’s occurring throughout Covid, units a precedent that we have by no means seen because the Fed bought its independence,” Druckenmiller mentioned. “It is clearly creating an enormous, huge mania in monetary property.”
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