The US is on a fast track to a recession, and it could be brutal..Speaking at the 2023 Sohn Investment Conference in San Francisco this week, billionaire Stan Druckenmiller said he believes the United States economy is teetering on the edge of a recession and predicts a “hard landing.”.He has a net worth of US$9.9 billion, according to the Bloomberg Billionaires Index, a ranking of the world’s 500 richest people..Druckenmiller originally thought a recession would happen near the end of 2023, but revised his outlook and instead sees it happening sometime in the current quarter, which means before the end of June..He made his money as a hedge fund manager over a period of 30 years and managed money for billionaire George Soros for more than a decade until 2000. He is also the founder of Duquesne Family Office..A number of economic factors caused Drunkenmiller to see the recession coming in the US, including a decline in retail sales and the recent unsteadiness in the country’s regional banks..“I am not predicting something worse than 2008,” he said, adding, “it’s just naive not to be open-minded to something really, really bad happening.”.He told the conference crowd his definition of a hard landing is unemployment higher than 5%, a 20% decline in corporate profits and an increase in bankruptcies..Druckenmiller said it’s a demanding time to make economic forecasts and he sees no “fat pitches” in offering investment ideas, saying his stock portfolio is neither net long nor short and his advice was to take a conservative, cautious approach with equity hedge funds in the short term..“You’re going to have unbelievable opportunities in the next couple of years,” he said. “There’s a lot of dispersion within industries, and just make sure to preserve your capital until they present themselves.”.Looking past a recession, from which he says the economy will emerge, Druckenmiller believes the housing industry, copper, biotech firms and companies working artificial intelligence will benefit the most..“AI is very, very real and could be every bit as impactful as the internet,” said Druckenmiller, who owns Nvidia Corp. and Microsoft Corp. stocks..“AI could eventually spawn US$100-billion companies.”.Not a fan of the easy monetary and fiscal policies of the US Federal Reserve (which are much the same as the Bank of Canada), Druckenmiller said policymakers left themselves less wiggle room compared with previous economic cycles..“We basically wasted all our bullets,” he said..Druckenmiller's been vocal about the instability of unchecked future government spending, saying “it's a lie and it's a fantasy to say we don’t have to cut entitlements. The problem is we’re either going to cut them now or we’re going to cut them later.” .Later, he said, will be much more costly..Of course the old adage is ‘when the US coughs, Canada gets a cold’ and the economic team at RBC says the US is coughing..“The upcoming recession we expect still sits firmly on the ‘mild’ side of historical downturns. But we don’t expect a bumpy landing for the economy to be avoided altogether. Certainly, there is a chance broader, near-term consumer spending could be stronger and less sensitive to interest rate increases than expected,” says RBC..“Labour markets have been very strong, and households accumulated a large amount of savings over the pandemic.”.But demand is outweighing the supply of goods and services and stronger spending would result in inflation pressures and possibly higher interest rates. .“These rates will cut further into household purchasing power down the road, delaying but not preventing a downturn."."Recent inflation data has been encouraging, particularly in Canada, and the easing in price growth is diluting some of the larger downside risks to the macroeconomic outlook,” says RBC. “But consumer demand probably needs to soften for inflation to return fully to central bank target rates. .“And the alternative to the relatively mild ‘bumpy,’ economic downturn we expect in 2023 could still look more like a crash landing down the road if substantially higher interest rates and a larger pullback in economic activity is required to get inflation fully back under control.”
The US is on a fast track to a recession, and it could be brutal..Speaking at the 2023 Sohn Investment Conference in San Francisco this week, billionaire Stan Druckenmiller said he believes the United States economy is teetering on the edge of a recession and predicts a “hard landing.”.He has a net worth of US$9.9 billion, according to the Bloomberg Billionaires Index, a ranking of the world’s 500 richest people..Druckenmiller originally thought a recession would happen near the end of 2023, but revised his outlook and instead sees it happening sometime in the current quarter, which means before the end of June..He made his money as a hedge fund manager over a period of 30 years and managed money for billionaire George Soros for more than a decade until 2000. He is also the founder of Duquesne Family Office..A number of economic factors caused Drunkenmiller to see the recession coming in the US, including a decline in retail sales and the recent unsteadiness in the country’s regional banks..“I am not predicting something worse than 2008,” he said, adding, “it’s just naive not to be open-minded to something really, really bad happening.”.He told the conference crowd his definition of a hard landing is unemployment higher than 5%, a 20% decline in corporate profits and an increase in bankruptcies..Druckenmiller said it’s a demanding time to make economic forecasts and he sees no “fat pitches” in offering investment ideas, saying his stock portfolio is neither net long nor short and his advice was to take a conservative, cautious approach with equity hedge funds in the short term..“You’re going to have unbelievable opportunities in the next couple of years,” he said. “There’s a lot of dispersion within industries, and just make sure to preserve your capital until they present themselves.”.Looking past a recession, from which he says the economy will emerge, Druckenmiller believes the housing industry, copper, biotech firms and companies working artificial intelligence will benefit the most..“AI is very, very real and could be every bit as impactful as the internet,” said Druckenmiller, who owns Nvidia Corp. and Microsoft Corp. stocks..“AI could eventually spawn US$100-billion companies.”.Not a fan of the easy monetary and fiscal policies of the US Federal Reserve (which are much the same as the Bank of Canada), Druckenmiller said policymakers left themselves less wiggle room compared with previous economic cycles..“We basically wasted all our bullets,” he said..Druckenmiller's been vocal about the instability of unchecked future government spending, saying “it's a lie and it's a fantasy to say we don’t have to cut entitlements. The problem is we’re either going to cut them now or we’re going to cut them later.” .Later, he said, will be much more costly..Of course the old adage is ‘when the US coughs, Canada gets a cold’ and the economic team at RBC says the US is coughing..“The upcoming recession we expect still sits firmly on the ‘mild’ side of historical downturns. But we don’t expect a bumpy landing for the economy to be avoided altogether. Certainly, there is a chance broader, near-term consumer spending could be stronger and less sensitive to interest rate increases than expected,” says RBC..“Labour markets have been very strong, and households accumulated a large amount of savings over the pandemic.”.But demand is outweighing the supply of goods and services and stronger spending would result in inflation pressures and possibly higher interest rates. .“These rates will cut further into household purchasing power down the road, delaying but not preventing a downturn."."Recent inflation data has been encouraging, particularly in Canada, and the easing in price growth is diluting some of the larger downside risks to the macroeconomic outlook,” says RBC. “But consumer demand probably needs to soften for inflation to return fully to central bank target rates. .“And the alternative to the relatively mild ‘bumpy,’ economic downturn we expect in 2023 could still look more like a crash landing down the road if substantially higher interest rates and a larger pullback in economic activity is required to get inflation fully back under control.”
