Taps Coogan – February 4th, 2021

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Legendary investor Stanley Druckenmiller, arguably the most successful hedge fund manager alive today, recently sat down with Goldman Sachs in a rare interview to share his outlook for markets. In a nutshell, Mr. Druckenmiller says “buckle up” because this is the “wildest” market outlook that he has seen in his career, which spans back to 1978.

 

Some excerpts from Stanely Druckenmiller:

“Buckle up… I’ve been doing this as some kind of Chief Investment Officer since 1978 and this is about the wildest cocktail I’ve ever seen in terms of trying to figure out a roadmap…”

“The economic downturn (last year) was 5x the average recession since World War II but it did it in 25% of the time. Bizarrely, during a year where 11 million people were unemployed, we had the largest increase in personal income in 20 years… That’s because of the massive policy response that we got…”

“In three months we increased the deficit more than if you took the last five recessions combined and those were big ones… The Fed in six weeks bought more treasuries than they did in ten years under Bernanke and Yellen when people like me were screaming about how excessive QE was during that period. Corporate borrowing, which almost always goes down during a recession as corporations reliquefy, and had already gone from $6 trillion to $10 trillion because of the free money going into the period, actually went up $400 billion. Just to put that in perspective, it went down $500 billion during the Great Financial Crisis…”

“It’s possible, in fact probable, that all this stimulus is still going to be in place and frankly increasing just when we release the biggest increase in pent up demand globally that we’ve had maybe since the 1920s, which could make the world look extremely different than today.”

“I would say that my overriding theme is inflation relative to what the policy makers think.”

From the sound of it, Mr. Druckenmiller is bullish on Asian currencies and markets, bullish on commodities, bearish on the US Dollar, and expecting rising inflation and perhaps rising interest rates and borrowing costs, but he notes that it all depends on how policy makers react to rising inflation.

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