“‘Once people realize the Fed doesn’t have to keep increasing rates and will soon take rates down…that will be a buy signal for markets.’”
— Bill Ackman
Pershing Square Capital Management’s billionaire founder Bill Ackman shared some commentary about markets and the U.S. economy during a brief interview on CNBC’s “Squawk Box” Tuesday morning.
After slamming the Fed for not acting aggressively enough back in May, Ackman is clearly pleased to see Fed Chairman Jerome Powell doubling down on a plan to keep interest rates higher for longer.
“I think they said they’re going to do what they have to do which is raise rates and keep them there for an extended period,” Ackman said Tuesday. “Our biggest fear was inflation, and that’s why we wanted the Fed to raise interest rates.”
Asked where he sees inflation 12 months from now, Ackman replied that he expects price pressures will come down “a lot,” falling to 4%, if not 3.5%, from a peak of 9.1% in June, which was the highest recorded level in 41 years.
“I think inflation is coming off” he said. “I think people will expect the Fed to ease.’
And once investors recognize the Fed as winning its battle against inflation, Ackman expects stocks will rebound. “Once people realize the Fed doesn’t have to keep increasing rates and will soon take rates down … that will be a buy signal for markets.”
This mirrors the expectation for a “soft landing” in the U.S. expressed by Goldman Sachs Group
GS,
-0.28%
economist Jan Hatzius, who has written extensively about it.
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U.S. stocks have stumbled this year, as have bonds, in what has by some measures been one of the worst years for the markets in decades. The S&P 500
SPX,
+0.17%
is down 17.5% so far this year. Stocks turned lower shortly after the open on Tuesday as the energy crisis in Europe and expectations of further central-bank rate hikes continued to weigh on investors’ appetite for riskier assets.
As far as Pershing Square’s portfolio is concerned, Ackman said it hasn’t changed much since the beginning of the year — aside from the firm’s short-lived position in Netflix Inc.
NFLX,
+0.60%.
Pershing Square’s latest SEC filings back this up. As of the end of June, the firm’s portfolio consisted of concentrated bets on Lowes Inc.
LOW,
+1.30%,
Chipotle Mexican Grill
CMG,
+0.39%,
Hilton Worldwide Holdings
HLT,
+1.40%,
Howard Hughes Corp.
HHC,
+0.28%
and Canadian Pacific Railway
CP,
+0.69%.
