Stanley Druckenmiller, who closed his celebrated hedge fund in 2010 and now runs his own money, has shifted his large equity position into Treasury bonds, a sign of his downbeat view in the wake of the Trump administration’s escalation of the trade war with China.
He reallocated his assets after President Donald Trump tweeted in early May that Washington was hiking tariffs on Chinese goods to 25% from 10% because of what Trump termed bad faith from China’s negotiators.
“When the Trump tweet went out, I went from 93% invested to net flat, and bought a bunch of Treasuries,” the investor said during an interview at the Economic Club of New York. “Not because I’m trying to make money, I just don’t want to play in this environment.”
His remarks, as reported by Bloomberg, preceded Federal Reserve Chairman Jerome Powell’s speech Tuesday in which he said cutting short-term interest rates was on the table. Worry over the trade war heating up has battered stocks for the past month. Powell’s statement sparked a turnaround in stocks, with the S&P 500 advancing 2.14% yesterday. Druckenmiller indicated that he thought the Fed would push down rates to zero in the next 18 months.
With a net worth of $4.6 billion, according to Forbes, Druckenmiller had established an enviable record of 30% yearly returns at his hedge fund Duquesne Capital, until he closed it in 2010 saying he no longer thought he could deliver such a performance. Prior to that, he was lead portfolio manager for George Soros’ Quantum Fund.
Druckenmiller doubted that Trump would give any ground in negotiations with the Chinese, because he believes the president sees a hard line on tariffs as a winning strategy in the Trump 2020 reelection bid.
Given the perilous state of the market, Druckenmiller said that Treasuries are “the best game in town.” Treasury bonds, which had been popular lately as a safe haven, dipped in price Tuesday amid the stock rally.
The billionaire investor did not predict an oncoming recession, but expressed fears that the president had damaged the economy. In 2008, he backed some of Trump’s rivals for the GOP presidential nomination. The financier said he doubted Trump would win a second term.
Nevertheless, he said he opposed trying to impeach Trump because the process would take too long and “the country would go through hell.”
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Tags: China, Donald Trump, Jerome Powell, Stanley Druckenmiller, Trade War, Treasury bonds