Bill Ackman Says Markets Aren’t Confident Fed Can Fight Inflation


  • Markets aren’t confident that the Federal Reserve can tame record inflation, Bill Ackman tweeted Tuesday. 
  • He predicts that inflation can only come down if the Fed aggressively raises rates, or if stocks crash.
  • “It ends when the Fed puts a line in the sand on inflation and says it will do ‘whatever it takes,'” Ackman said.

Bill Ackman, the CEO and founder of Pershing Square Capital Management, said markets are facing a precarious environment because the


Federal Reserve

has lost credibility in its attempt to combat inflation. 

“Inflation is out of control,” Ackman tweeted Tuesday in a Twitter thread. “Inflation expectations are getting out of control. Markets are imploding because investors are not confident that the @FederalReserve will stop inflation.”

 

The Fed has lost its credibility in fighting inflation because it pivoted too late and has been too dovish, Ackman explained. Now, the only way to cool things down is with aggressive monetary policy or with an economic collapse. 

He pointed out that, currently, there’s unprecedented job openings and 3.6% unemployment, as well as long-term supply and demand imbalances across sectors. 

“There is no prospect for a material reduction in inflation unless the Fed aggressively raises rates, or the stock market crashes, catalyzing an economic collapse and demand destruction,” Ackman said. 

What’s more, with inflation notching 40-year highs, the Fed has catalyzed a downward market spiral and spooked buyers. The only way that the market can soar once again is if the government can tame inflation expectations, Ackman said. 

 

Meanwhile, fellow billionaire investor Ray Dalio said the Fed’s inability to mitigate high inflation is going to create an environment of negative real returns

To Dalio, traditional safe havens like cash and bonds are no longer attractive for investors. And his Bridgewater colleague Bob Prince forecasted that the US is on the cusp of stagflation and investors do not fully appreciate the extent to which inflation will remain elevated. 

“It ends when the Fed puts a line in the sand on inflation and says it will do ‘whatever it takes,'” Ackman said. “And then demonstrates it is serious by immediately raising rates to neutral and committing to continue to raise rates until the inflation genie is back in the bottle.”



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