Stan Druckenmiller: ‘Animal Spirits’ Are Back In Markets

Johnny HopkinsEconomyLeave a Comment

In his recent interview with CNBC, Stan Druckenmiller discusses the current economic landscape, highlighting low unemployment (4%) and solid GDP growth (3%). He notes a shift from an anti-business administration to a more business-friendly one, leading to increased CEO confidence.

While the economy appears strong in the short term, he warns that the earnings yield to bond yield ratio is at its most unattractive level in 20 years. Druckenmiller remains neutral on market direction, citing conflicting forces of economic strength and rising bond yields. He advises focusing on individual stocks rather than the overall market and anticipates significant changes due to political and technological shifts.

Here’s an excerpt from the interview:

Druckenmiller: The economy is very interesting. We’re at a very low unemployment rate, 4%, essentially. We’ve got 3% GDP growth. And I’ve been doing this for 49 years. We’re probably going from the most anti-business administration to the opposite.

So we do a lot of talking to CEOs and companies on the ground, and I’d say CEOs are somewhere between relieved and giddy.

We’re a believer in animal spirits. Um, Paul Ryan was on your show last week talking about a 32% increase in business confidence over the last 12 months. I think that’s probably a record in terms of change.

So the economy looks very, very strong, at least for the next six months, which is about, uh, as far out as one can see with any degree of confidence.

In terms of the markets, I would say it’s complicated. Despite what I just said about all the wonderful things about the economy, we have an earnings yield to bond yield—probably the most unattractive level, not probably, the most unattractive level in 20 years.

So you’re going to have this push of a strong economy versus bond yields rising in response to that strong economy. And that kind of makes me not have a strong opinion one way or the other on the market.

I will say this: in my business, every change creates change in security prices. Having this kind of radical change from one administration to the other, in addition to what’s going on in the private sector with innovation, then you got deregulation from the government, disruption—

I think there’s going to be plenty of change and plenty for your viewers to do. I wouldn’t worry about the market. I’d focus on individual stocks.

You can watch the entire discussion here:

Stanley Druckenmiller – CNBC

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