Bill Ackman recently tweeted a thread explaining why there’s no buyers for stocks. Here’s an excerpt from the thread:
Ackman: Inflation is out of control. Inflation expectations are getting out of control. Markets are imploding because investors are not confident that the federal reserve will stop inflation. If the Fed doesn’t do its job, the market will do the Fed’s job, and that is what is happening now.
The only way to stop today’s raging inflation is with aggressive monetary tightening or with a collapse in the economy. With today’s unprecedented job openings, 3.6% unemployment, long-term supply/demand imbalances in energy, ag and food, housing, and labor, and with the wage-price spiral that is underway, there is no prospect for a material reduction in inflation unless the Fed aggressively raises rates, or the stock market crashes, catalyzing an economic collapse and demand destruction.
In the last day or so, various current and former Fed members have waffled and made dovish remarks proposing a modest increase in rates and a pause in the fall. The Fed has already lost credibility for its misread and late pivot on inflation.
There is no economic precedent for 200 to 300 bps of fed funds addressing 8% inflation with employment at 3.6%. Current Fed policy and guidance are setting us up for double-digit sustained inflation that can only be forestalled by a market collapse or a massive increase in rates. That is why I believe there are no buyers for stocks.
How does this downward market spiral end? It ends when the Fed puts a line in the sand on inflation and says it will do ‘whatever it takes.’ And then demonstrates it is serious by immediately raising rates to neutral and committing to continue to raise rates until the inflation genie is back in the bottle.
Stocks (of real businesses) are cheap once again. Markets will soar once investors can be confident that the days of runaway inflation are over. Let’s hope the Fed gets it right.
You can read the entire thread here:
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