In a recent CNBC interview, hedge fund manager Stanley Druckenmiller said that the market’s comeback in recent weeks has “humbled” him and that he underestimated the power of the Fed.
Druckenmiller explained his concerns regarding recent years of “easy money” and the surge in corporate debt: “When Covid hit, I was pretty much of the view that there was a good chance that the credit bubble had finally burst and the unwinding of that leverage would take years.” His concern, he said, prevented him from capitalizing on the market’s rebound since its March 23rd low, and resulted in Druckenmiller’ s fund returning a paltry 3% during that period.
“Well,” he said, “I’ve been humbled many times in my career, and I’m sure I’ll be many times in the future. And the last three weeks certainly fits that category.”
Druckenmiller notes that the Fed stimulus along with investor excitement about the gradual reopening of U.S. businesses is resulting in strong outperformance by those stocks that were the hardest hit in March, with the Fed’s support and the potential for a vaccine adding further support.