Stock investors are showing some hesitation ahead of Tuesday as big signals about the economy come this week through consumer prices and retail sales. In addition, Apple is expected to tempt consumers with yet another new iPhone on Tuesday.
To what extent should investors be concerned now? Us call of the day from Pershing Square Capital Management manager Bill Ackman says we can relax a bit in the short term, but it’s not all roses and moonshine.
Read: Hedge funds have bailed out American consumers on a large scale, according to data from Goldman Sachs
He told the Julia La Roche Show in an interview that he felt like he had a “crystal ball of what was going to happen,” starting in January 2020 with the COVID-19 outbreak, and continuing through interest rates and the economy. The manager reportedly made nearly $4 billion from a number of pandemic-related bets.
“I would say that the crystal ball has become somewhat clouded in recent times. “I think these are unusual economic times and maybe we always say that, but I don’t think this is a pattern that has been repeated… or that it hasn’t been that way for over 100 years,” he said.
But he remains optimistic in the short term. “For two years people have been saying the recession is just around the corner, and you know we had a very different view, and still have this view that I think people are coming to, that the economy is actually still quite strong is. ” he said.
And while lower-income earners have used up a lot of COVID savings, he doesn’t think the economy has yet seen a real impact from the big fiscal stimulus in recent years.
Looking further, however, Ackman has a pile of concerns about the economy. He expects that about a third of the federal debt will be revised, meaning that over a relatively short period of time “interest costs will be a much larger share of the budget deficit, which will not contribute to the economy.”
And while higher interest rates help savers, that will ultimately be a major drag on the economy, he said, adding that rising inflation, mortgage rates, car payments and credit card rates will all slow the economy.
“We are still in the middle of a war and there is political uncertainty with the upcoming elections,” he said. That partly explains Pershing Square’s hedging via a short position on the 30-year Treasury bond BX:TMUBMUSD30Y that he detailed in a tweet in early August.
For about a year, long-term Treasury yields have fallen below short-term interest rates, in what is known as an inverted yield curve, a phenomenon often seen as a harbinger of a recession.
“I don’t see inflation returning to 2% anytime soon, if at all, and if in fact we live in a world with persistent 3% inflation, then you know there’s no point in having inflation at 4. 3%, 4.25 percent. % government bond yield,” he said.
Other risks? Ackman remains concerned about regional banks after the spring crisis, as many have large fixed-income portfolios of assets that have become increasingly less valuable as interest rates rise. “I would say the picture of commercial real estate has not improved. You’re going to see real defaults, especially on office assets,” he said.
“Regional banks have the most exposure to construction loans, so there will be many construction loans that cannot be repaid. There will be a lot of restructuring, so either the investor groups will have to put in a lot more equity or the banks will suffer some losses,” he said.
Ackman says investors also have to deal with a presidential campaign that could cause some stress. The hedge fund manager said he was surprised there haven’t been “more and better alternative candidates” for the 2024 campaign, instead of President Joe Biden and former President Donald Trump.
He would like to see Jamie Dimon, CEO of JPMorgan Chase & Co., throw his hat in the ring and believe Biden is “beatable” by a strong candidate.
Ackman himself said it’s “possible,” he could one day run for office himself, but he’s more focused on having a better investment track record than Warren Buffett, chairman and CEO of Berkshire Hathaway — and has so’ n 30 years to equal the Oracle of Omaha.
Read: Here’s an easy way to make more concentrated plays on the ‘Magnificent Seven’ stocks
The markets
Stock futures ES00,
NQ00,
have tilted south, led by technology, with Treasury yields BX:TMUBMUSD02Y BX:TMUBMUSD10Y holding steady to slightly lower and the dollar DXY recovering some ground.
Read: Watch this ‘canary in the coal mine’ for signs of trouble in the markets, says Neuberger Berman CIO
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The buzz
Oracle shares ORCL,
are down 10% in premarket trading after disappointing guidance from the cloud database group.
Apple’s AAPL,
the big event kicks off at 1pm Eastern, with the launch of the more expensive iPhone 15 expected to be on the agenda.
Hot ticket. The IPO of Arm Holdings is already ten times oversubscribed and bankers will stop taking orders on Tuesday afternoon, Bloomberg reports, citing sources.
Tech’s Wild Week: How the mega IPO of Apple, Google, AI and Arm could set the agenda for years to come
Good results boost the shares of supermarket operator Casey’s General Stores CASY,
Packaging giant WestRock WRK,
and rival Smurfit Kappa SK3,
have announced a stock and cash seizure. WestRock shares are up 8% premarket.
Read: The U.S. budget deficit will double this year to $2 trillion, excluding student loans
The best of the internet
No better than gambling? Amateur investors dive into 24 options.
China may ban clothing that hurts people’s feelings.
The US is taking on tech giant Google in a landmark case.
The graph
Bank of America’s global fund manager survey for September shows that investors are still bearish, but no longer on the extreme side. Here’s the graph:
Read: Fund managers just made their biggest move ever into US stocks – and out of emerging markets
The tickers
These were the most active stock market tickers on MarketWatch as of 6 a.m. Eastern:
Ticker |
Security name |
TSLA, |
Tesla |
AMC, |
AMC Entertainment |
CGC, |
Canopy growth |
NVDA, |
Nvidia |
G.M.E., |
GameStop |
AAPL, |
Apple |
A.C.B., |
AuroraCannabis |
NIO, |
Nio |
MULN, |
Mullen Automotive |
AMZN, |
Amazon |
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