Stanley Druckenmiller says the bear market has a ways to run and a recession is in the cards

Published Thu, Jun 9 20225:33 PM EDT

Billionaire investor Stanley Druckenmiller struck an pessimistic tone about the markets Thursday, seeing a turbulent road ahead as the Federal Reserve struggles to engineer a soft landing. "For those tactically trading, it's possible the first leg of that has ended. But I think it's highly, highly probable that the bear market has a ways to run," the founder of Duquesne Family Office said at the 2022 Sohn Investment Conference. The S & P 500 has fallen more than 15% this year, as the Fed's aggressive tightening action stoked recession fears. The benchmark briefly dipped into bear market territory last month on an intraday basis. The longtime trader believes that an economic downturn is likely on the horizon as the central bank faces an uphill battle with inflation stubbornly standing at a 40-year-high. The Fed has enacted two rate increases totaling 75 basis points, including a 50 basis point increase in May . "The probabilities of being a soft landing are pretty remote. Historically, I think we've only pulled off two or three in history....there's so much wood to chop. And there's been such a broad asset bubble going into it," Druckenmiller said. "Once inflation has got above 5%... it's never been tamed without a recession. So if you're predicting a soft landing, you're going against decades of history." Druckenmiller said he's mostly sitting on the sidelines instead of shorting the market aggressively as bear markets are known to have big bounces. 'I've lived through enough bear markets, that if you get aggressive in a bear market, on the short side, you can get your head ripped off in rallies. I'm pretty much taking a break," Druckenmiller said. "My anticipation is I will be going back to the short equity position at some point if the market affords me, if not, hopefully, I'll just sidestep a decline." Druckenmiller once managed George Soros' Quantum Fund and shot to fame after helping make a $10 billion bet against the British pound in 1992. He later oversaw $12 billion as president of Duquesne Capital Management before closing his firm in 2010. The investor believes that geopolitical risks are also weighing on a volatile stock market. "Given the extent of the asset bubble and the destruction in the markets, given what's going on in Ukraine, giving zero Covid policy in China, I don't take a lot of comfort from that," Druckenmiller said. "So I assume, and pretty strongly, soon we're going to have a recession sometime in 2023."

Stanley Druckenmiller

Anjali Sundaram | CNBC