- Stanley Druckenmiller told CNBC on Wednesday that the stock market is in a “raging mania” fuelled by the Federal Reserve.
- The billionaire investor said that the Fed did a “great job in March” but that the recent market rally has been “excessive.”
- “Look, everybody loves a party … but inevitably after a big party there’s a hangover, and right now we’re in an absolute raging mania,” he said.
- He added that he’s worried the US could easily see 5-10% inflation in the next four or five years.
Billionaire investor Stanley Druckenmiller told CNBC on Wednesday that there is a “massive, massive raging mania in financial assets” fuelled by the Fed that has not spilled over onto Main Street and will lead to challenges for potentially the next five years.
“I have no clue where the markets are going to go in the near term,” Druckenmiller said. “But I just want to remind people that there is no valuation support because we drop 10%. That hasn’t mattered, because we’re so far out the valuation realm with the Fed doing what they’re doing … I would say the next three to five years are going to be very, very challenging.”
The head of Duquesne Family Office said that Fed Chair Jerome Powell did “a great job in March” after cutting rates, but that the follow-up market rally has been “excessive.” Even though Tuesday marked the S&P 500‘s third straight day of losses, the index has still rebounded roughly 48% from its March 23 intraday low.
“Look, everybody loves a party … but inevitably after a big party there’s a hangover, and right now we’re in an absolute raging mania,” he added.
One example of the mania is the performance of large companies splitting their stocks. Druckenmiller said these splits create no value, but the stocks of the companies continue to go higher, sometimes by 50%, after the split.
He also said that for the first time in a long time, he’s worried about inflation.
“We actually have the chairman of the Federal Reserve with a $US3 trillion deficit out lobbying Congress to do more spending and guaranteeing those of us on Wall Street that he’ll underwrite it. I think it’s dangerous, I think we could easily see 5-10% inflation in the next four or five years,” Druckenmiller said.
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