“‘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.”’”
— Bill Ackman, founder and CEO, Pershing Square Capital
That’s hedge-fund billionaire Bill Ackman sounding off on Twitter Tuesday, blaming a timid Federal Reserve for not doing enough to signal to investors that it’s committed to getting inflation under control. The Fed must pledge to do “whatever it takes” and follow it up with a series of aggressive rate increases, he argued.
Read the whole thread for the flavor. Ackman’s beef is that the Fed, despite raising rates by an outsize 50 basis points, or half a percentage point, earlier this month and signaling at least two more half-point hikes are in store at coming meetings, is set to remain well behind the curve.
“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,” he said. “The Fed has already lost credibility for its misread and late pivot on inflation.”
Atlanta Fed President Raphael Bostic on Monday said a September pause in rate increases to reassess could make sense, according to news reports.
Pushing the fed-funds rate up by 300 basis points from near zero while inflation is running above 8% year over year and unemployment stands at 3.6% is a recipe for double-digit inflation that can otherwise “only be forestalled by a market collapse or a massive increase in rates,” Ackman said.
Ackman’s remarks came as stocks fell sharply Tuesday, seeing renewed pressure after a Monday bounce. The Dow Jones Industrial Average
was down 330 points, or 1%, while the S&P 500
slumped nearly 2% to trade just below 3,900 —- a finish below 3.837.25 would see the large-cap benchmark officially enter a bear market. The Nasdaq Composite
which entered a bear market earlier this year, was down more than 3%.
“Markets are imploding because investors are not confident that the [Federal Reserve] will stop inflation,” he tweeted. And as a result, the market is doing the Fed’s job for it.