Stanley Druckenmiller sees ‘onerous touchdown’ in 2023 with a doable deeper recession than many count on

Billionaire investor Stanley Druckenmiller believes the Federal Reserve’s try and shortly unwind the excesses it helped construct up for a decade with straightforward financial coverage is not going to finish nicely for the U.S. financial system.

“Our central case is a tough touchdown by the top of ’23,” Druckenmiller stated at CNBC’s Delivering Alpha Investor Summit in New York Metropolis Wednesday. “I will probably be shocked if we do not have recession in ’23. I do not know the timing however definitely by the top of ’23. I can’t be stunned if it isn’t bigger than the so referred to as common backyard selection.”

And the legendary investor, who has by no means had a down yr within the markets, fears it could possibly be one thing even worse. “I do not rule out one thing actually unhealthy,” he stated.

Druckenmiller believes the extraordinary quantitative easing and nil rates of interest over the previous decade created an asset bubble.

“All these components that trigger a bull market, they are not solely stopping, they’re reversing each one in all them,” Druckenmiller stated. “We’re in serious trouble.”

The Fed is now in the course of its most aggressive tempo of tightening for the reason that Eighties. The central financial institution final week raised charges by three-quarters of a share level for a 3rd straight time and pledged extra hikes to beat inflation, triggering a giant sell-off in danger property. The S&P 500 has taken out its June low and reached a brand new bear market low Tuesday following a six-day shedding streak.

The investor stated the Fed made a coverage error when it got here up with a “ridiculous idea of transitory,” pondering inflation was pushed by provide chain and demand components largely related to the pandemic.

“Whenever you make a mistake, you bought to confess you are incorrect and transfer on that 9 or 10 months, that they only sat there and purchased $120 billion in bonds,” Druckenmiller stated. “I feel the repercussions of which can be going to be with us for an extended, very long time.”

The buyer worth index elevated 8.3% in August yr over yr, close to a 40-year excessive and coming in above consensus expectation.

Druckenmiller as soon as managed George Soros’ Quantum Fund and shot to fame after serving to make a $10 billion wager towards the British pound in 1992. He later oversaw $12 billion as president of Duquesne Capital Administration earlier than closing his agency in 2010. 

“You do not even want to speak about Black Swans to be anxious right here. To me, the chance reward of proudly owning property would not make quite a lot of sense,” Druckenmiller stated.