Billionaire investor David Einhorn says the Fed wants stock prices to go down and will hike rates higher than markets expect
Current predictions that interest rates will rise above 5% by year-end are too low, Einhorn says, saying that the Fed wants stocks to fall.
REUTERS/Brendan McDermid
- Greenlight Capital's David Einhorn said the Fed wants to knock stocks lower and will keep hiking rates.
- He sees today's inflationary era as potentially caused by government spending and interest rates that have not gone high enough.
- Greenlight achieved a 36.6% return on 2022 investments.
Billionaire investor and Greenlight Capital boss David Einhorn is gearing up for a bear market, rejecting hopes that the Federal Reserve will spare stocks when thinking about future policy moves.
"The Fed does want stock prices lower. They've made that clear," he said on CNBC. "I think it would be better if they cared less about the stock market in either direction."
While a higher-for-longer interest regime has become the general expectation on Wall Street, Einhorn thinks estimates for how far the Fed will hike rates are still too low. He didn't provide an exact estimate, current predictions hold that the Fed's benchmark rate will climb to 5.4% by the year's end.
Currently, the rate sits at a range of 4.5%-4.75%.
The value-focused investor reasoned that an incredibly large fiscal deficit continues to stimulate the economy, while short-term rates were not high enough to match inflation. He also posited that rate hikes may in part be helping drive economic activity higher.
"When you take rates down, savers lose income; it's maybe good for financial speculation, but it doesn't it doesn't help people's real personal incomes. And then when you flip that, which is what's happening now, it actually strengthens the consumer position," he said."I think that's why people are surprised that the economy is as strong as it is, despite the fact that rates have come up."
Einhorn's investments performed exceptionally well in 2022, yielding a 36.6% return, despite a 19% slide in the S&P 500.