Legendary billionaire investor Stanley Druckenmiller said that the stock market is likely to be flat for the next ten years. “There’s a high probability in my mind that the market, at best, is going to be kind of flat for 10 years, sort of like this ’66 to ’82 time period,” Druckenmiller said in an interview with Alex Karp, CEO of Palantir, a software and AI firm on September 13. Rising inflation, interest rate hikes, the ongoing Ukraine-Russia war, and reversing globalization, he says, are highly likely to cause a global recession in the coming decade.
Harder than ever for Stanley Druckenmiller to predict what will happen in next 1 year
Druckenmiller said it’s harder than ever for him to forecast how the market may behave over the next six months to a year due to the war, the pandemic, and how nations have reacted. “Between the pandemic and the war, and the crazy policy response, in the United States and worldwide, this is the hardest environment I have encountered to forecast,” he said. The factors that created the bull markets since 1982, and especially in the last decade, have not only stopped but have reversed, he added.
“I like darkness”: Stanley Druckenmiller
However, there may be an upside to the static environment created by a flat stock market. “The nice thing is, there were companies that did very, very well in that environment back then,” he said, referring to the flat stock market period between 1966 and 1982. “That’s when Apple Computer was founded, Home Depot was founded,” he added. Druckenmiller also warned investors of his dreary outlook, mentioning his bearish bias, and said that this is the toughest time in economic history to forecast. “I’ve had a bearish bias for 45 years and it had to work around, I like darkness,” he said.
Central banks are “reformed smokers”
Globalization, Druckenmiller says, leads to increased worker productivity and disinflation. However, rising tensions between the United States and China, and the Ukraine war has aided the reversal of globalization. Further, central banks that adopted relatively loose monetary policies following the 2008 Global Financial Crisis have started tightening them. This is evident from the hikes in interest rates by central banks globally. “The response after the global financial crisis to disinflation was zero rates, and a lot of money printing, quantitative easing. That created an asset bubble in everything,” he added.
Now, central banks are turning away from these policies. “Now, they’re like reformed smokers,” Druckenmiller said about central banks. “They’ve gone from printing a bunch of money, like driving a Porsche at 200 miles an hour, by not only taking the foot off the gas but just slamming the brakes on,” he added.
Druckenmiller, who is worth $10.1 Billion, ran his hedge fund, Duquesne Capital from 1981 until 2010 when he converted it into a family office. The fund posted average annual returns of about 30%. He also managed money for George Soros, lead portfolio manager at Quantum Fund, from 1988 to 2000. He is known for shorting against the British Pound in 1992, making over a billion dollars in profits.