25/05/2022 15:20
Either the Fed proves it is serious about raising rates significantly or else it will take a Wall Street crash to stop the inflation rush in the United States. This is what the head of hedge fund Pershing Square, Bill Ackman, said.
At the moment, the manager specified, “there is no prospect of a significant slowdown in inflation, unless the Fed raises rates more aggressively, or the sell-off that is hitting the markets does not turn into a total collapse “.
Ackman expressed his opinion with a series of Twitter posts.
A stock market crash, he continued, would effectively result in “an economic collapse, too, and the destruction of demand“, Thus relieving inflationary pressures.
For the hedge fund manager, the wave of liquidation that is besieging the markets in this 2022 is explained by the fact that investors are skeptical about the ability of the Federal Reserve di Jerome Powell to curb the price rush.
The turmoil, he added, will therefore only stop when the US central bank puts an end to inflation.
Ackman: “If the Fed doesn’t act, the market will. Collapsing “
“If the Fed doesn’t do its job, the market will do the Fed’s job, and that’s what’s happening now. The only way to stop today’s runaway inflation is with an aggressive monetary policy or with a collapse of the economy ”.
If, on the other hand, Powell & Co manage, with monetary tightening, to get investors the message that the days of continuous flares of inflation are over, then the markets (equities) will leap forward – continued ckman – So let’s hope the Fed does the right thing“.
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The next Fed meeting is on schedule the next 14-15 June; it was the same members of the Fed who indicated that new monetary tightening of 50 basis points, after the last one in May – which brought the fed funds rates to the range between 0.75% and 1% – are all ‘horizon.
Today they will be released the minutes of the Fomc – the monetary policy arm of the Fed – relating to the May meeting.
That 50 basis point rate hike – next to the first from mid-March 2018 – has been the strongest of the last 20 years, since 2000, or since the days of dot-com bubble burst.
The move had been widely discounted by the markets, rather cautious in the face of the possibility of even more hawkish turns by Powell & Co. Turns that however did not occur. Far from it: a positive surprise it just came with the words of Jerome Powell which, while repeating that inflation “is really too high”, had reassured the markets, stating that a squeeze of 75 basis points it was not something the Commission was actively considering.
However, despite Powell’s assurances, analysts at ING aren’t all that convinced that the Fed will not proceed to a 75 basis point tightening.
In their view, US rates will rise to a peak of 3.25%, given “the outlook for inflation, which is much more stubborn than in previous cycles”. AND “we are not ruling out a rate hike of 75 basis points in June ”.
In March 2020, in the darkest period of the Covid pandemicAckman issued a decidedly bleak warning, ‘prophesying’ in an interview with Cnbc “the arrival of hell” (“the hell is coming“) And begging the White House to impose a lockdown on the nation for a month.
Also around this time, the manager made a short bet against the market worth 2 billion dollars.