It's impossible to read the capital markets landscape correctly consistently, but hedge fund manager Stanley Druckenmiller was thought to be among the best at it. He completely missed the mark this year.
Druckenmiller told Bloomberg News on Wednesday that he did not take enough risk in 2019 and thus was unable to fully capitalize on the stock market's blistering rally. In fact, he said the Duquesne Family Office's returns just reached double digits last week. Meanwhile, the S&P 500 has skyrocketed more than 27% in 2019 and is currently trading at record highs.
In June, Druckenmiller said he sold everything and loaded up on Treasurys after President Donald Trump sent a tweet in May that increased U.S.-China trade tensions. Before that, he had been "93% invested in the market."
Worries over U.S.-China trade have subsided for the time being after both sides reached a so-called phase one trade deal last week. The move caused stocks to surge to records and bond prices to fall, working against the position Druckenmiller said he took.
Prior to that, Druckenmiller thought stocks were in a global bear market in late 2018.
"I couldn't have been more wrong," Druckenmiller told Bloomberg News, noting he "pivoted before it mattered." He later added that he was positioned "very timidly" heading into 2019.
Being "timid" and avoiding risk are uncharacteristic words to use when talking about Druckenmiller. In the early 1990s, when he headed investment strategy at Soros Fund Management, Druckenmiller oversaw a series of trades that sent the British pound tumbling and yielded a profit of about $1 billion. His performance while running Duquense Capital, his now-closed hedge fund, was also legendary as he returned an average of 30% annually to investors.
But at his age, 66, Druckenmiller said "he is just too conservative." He noted he is still a "competitive person," adding that he does not trust himself right now given the risks posed by the Trump administration.