Does Stanley Druckenmiller KNOW SOMETHING Wall Street Doesn't? He Is Making a HUGE BET on a BOND BUST!
Does Stanley Druckenmiller KNOW SOMETHING Wall Street Doesn't? He Is Making a HUGE BET on a BOND BUST!
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Key Points
Most of the market believes the Federal Reserve will continue to lower interest rates.
In September, the Fed's projections showed that the agency plans to keep dropping interest rates this year and in 2025 based on data at the time.
Druckenmiller appears to have the opposite view, making watchers wonder if the famed investor is seeing something others aren't.
Stanley Druckenmiller, known for generating superior market returns, is ready to play contrarian.
Billionaire investor Stanley Druckenmiller might be the best to ever do it, at least from a pure returns perspective. His firm, Duquesne Capital Management, which closed in 2010, generated average annual returns of 30% for three decades. That's better than Warren Buffett and Berkshire Hathaway.
Although Duquesne Capital is no more, Druckenmiller still invests through the Duquesne Family Office, and is not afraid to go against the grain. The George Soros protege is now making a bet that goes against the broader view of the market and the Federal Reserve, according to reported remarks of people who heard him speak at a conference in early October. Does he know something Wall Street doesn't?
Betting on a bond bust
The majority of the market and the Federal Reserve believe inflation will continue to slow and the Fed will keep lowering interest rates through 2025. The CME Group's FedWatch tool, which tracks the likelihood of interest rate changes by looking at one-month futures prices, indicates that the majority of traders (as of Oct. 15) expect the Fed to lower interest rates by an additional 50 basis points this year and get its benchmark rate down to a target range of 3.25% to 3.50% by the end of 2025. Keep in mind that these future projections of interest rates are constantly changing.
The Fed's "dot plot" also currently charts a similar path. The dot plot shows how each member of the Federal Open Market Committee (FOMC) thinks interest rates will trend and then compiles a consensus. The dot plot is updated every three months. The Fed believes that with inflation trending lower, it now needs to worry about the labor market, which has seen unemployment trending higher until the last two months. The Fed is trying to engineer a "soft landing" for the economy where inflation falls and gets back to the Fed's preferred 2% target without previous interest rate hikes tipping the economy into recession.
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