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Billionaire investor Stanley Druckenmiller has warned the Federal Reserve's response to inflation is going to be troubling for the U.S. economy.
What Happened: Druckenmiller said Wednesday he expects a "hard landing" by the end of next year at CNBC's Delivering Alpha Investor Summit.
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"Our central case is a hard landing by the end of '23. I will be stunned if we don’t have recession in '23," Druckenmiller said.
The billionaire investor also noted that he wouldn't be surprised if the recession is of the "so called average garden variety," but he isn't ruling out "something really bad," he said.
Druckenmiller explained that an asset bubble has formed as a result of continued quantitative easing over the last decade.
Now the Fed isn't just stopping, it's sharply reversing course, he said: "We are in deep trouble."
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From Last Week: Why The SPY Must Hold This Key Level To Avoid Disaster
Why It Matters: Last week, the Fed raised its benchmark rate by 0.75% for the third straight time and indicated that it will continue to hike well above the current level in what has been the most aggressive tightening cycle in more than 40 years.
Druckenmiller believes the Fed has made a mistake in thinking that inflation was being driven by supply and demand imbalances related to the pandemic.
"When you make a mistake, you got to admit you’re wrong ... I think the repercussions of that are going to be with us for a long, long time," he said.
Following last week's hike, the Fed has raised rates by a total of 3% in 2022. The latest Consumer Price Index reading of 8.3% shows that inflation is still near the highest levels since the 1980s.
The SPDR S&P 500 (NYSE:SPY) made new lows on Tuesday after six straight days of declines. Druckenmiller believes the risk/reward opportunity in the markets is still skewed to the downside. He noted that he expects the Dow Jones Industrial Average to trade essentially flat over the next 10 years.
SPY Price Action: The SPY was up 1.38% at $368.40 Wednesday afternoon, according to Benzinga Pro.
Photo: Tumisu from Pixabay.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.