Top investor Kyle Bass warns the Fed could crash the stock market this year — and predicts oil prices will surge this summer

Kyle Bass of Hayman Capital speaking at a 2016 appearance.
Kyle Bass. Reuters
  • Kyle Bass warned the Federal Reserve’s inflation fight could send the stock market down 25%.
  • The Hayman Capital boss predicted a surge in oil prices when the global economy reopens this summer.
  • Bass cautioned against buying Chinese stocks, citing fraud and regulatory risks.

Veteran investor Kyle Bass warned stocks could crash this year, predicted an oil-price surge within months, and blasted buyers of Chinese equities as irresponsible, in a CNBC interview this week.

Federal Reserve officials, under pressure to curb soaring inflation, are widely expected to hike interest rates and trim the central bank’s bond holdings in the coming months.

“There’s no way the stock market goes up this year, and it probably goes down pretty aggressively, if they stick to that plan,” Bass said.

The Hayman Capital Management boss added that raising short-term interest rates by just 100 or 125 basis points could spark a 25% drop in the stock market. That scale of decline would likely spook the Fed and lead to it scrapping its plans for further tightening, he said.

Bass predicted that West Texas Intermediate, the benchmark US oil price, would jump from $83 a barrel to $100 in the first half of this year. He suggested the global economy’s reopening would reignite energy demand, and the recent shift of capital spending from hydrocarbons to clean energy would result in supply constraints.

“Buckle your seatbelts,” he said, adding that he doesn’t expect hydrocarbon demand to fall over the next 20 years, as a global transition to renewable energy will take 40 or 50 years.

Finally, Bass cautioned against gambling on Chinese stocks rallying this year. “People who are betting on a bounce, that’s a fool’s game,” he said.

The hedge fund manager highlighted the risk of accounting fraud due to a lack of financial audits in China, and the prospect of further regulatory crackdowns on Chinese companies.

“People investing in Chinese equities are breaching their fiduciary duties to their investors,” he said.