““When people realize that the Fed doesn’t have to keep raising interest rates and will soon cut interest rates … that will be a buy signal for the markets.””
The billionaire founder of Pershing Square Capital Management, Bill Ackman, shared some commentary about markets and the US economy during a short interview on CNBC’s “Squawk Box” Tuesday morning.
After criticizing the Fed for not acting aggressively enough in May, Ackman is clearly pleased to see Fed Chair Jerome Powell redouble his plan to keep rates higher for longer.
“I think they’ve said they’re going to do what they need to do, which is raise the rates and keep them there for a longer period of time,” Ackman said Tuesday. “Our biggest fear was inflation, which is why we wanted the Fed to raise interest rates.”
When asked where he sees inflation 12 months from now, Ackman said he expects price pressures to ease “much”, to 4%, if not 3.5%, from a peak of 9.1% in June, the highest. registered level over 41 years.
“I think inflation is taking off,” he said. “I think people will expect the Fed to ease.”
And once investors recognize that the Fed has won its battle against inflation, Ackman expects stocks to recover. “Once people realize that the Fed doesn’t have to keep raising rates and will soon cut rates… that will be a buy signal for the markets.”
This reflects the expectation of a “soft landing” in the US expressed by Goldman Sachs Group GS,
economist Jan Hatzius, who has written extensively about it.
Do not miss: US is on track for a soft landing, says Goldman Sachs chief economist
US stocks, like bonds, stumbled this year in what has been one of the worst years for the markets in decades by some measures. The S&P 500 SPX,
has fallen by 17.5% so far this year. Share prices fell shortly after opening on Tuesday, as the energy crisis in Europe and expectations of further rate hikes by central banks continued to weigh on investors’ appetites for riskier assets.
As for Pershing Square’s portfolio, Ackman said not much has changed since the start of the year — other than the company’s short-lived position in Netflix Inc. NFLX,
Pershing Square’s latest SEC filings back this up. At the end of June, the company’s portfolio consisted of concentrated bets on Lowes Inc. LOW,
Chipotle Mexican Grill CMG,
Hilton Worldwide Holdings HLT,
Howard Hughes Corp. HHC,
and Canadian Pacific Railway CP,
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