Greenlight Capital’s David Einhorn said Wednesday that he maintains his negative stance on the stock market as inflation and interest rates could shoot higher.
“I think we should be bearish on equities and bullish on inflation,” Einhorn said on CNBC’s Halftime Report. “I think we have a policy right now, which is probably pretty good for Main Street, but it’s going to be tough and it’s going to get tougher for financial assets.”
The star hedge fund manager believes the Federal Reserve has more work to do to combat stubborn price pressures, which are pushing interest rates even higher than consensus expectations. The central bank has pushed interest rates to a target range of 4.5%-4.75%, the highest since October 2007.
“I think both long-term and short-term interest rates are moving higher and probably higher than what people expect,” Einhorn said.
Government bond yields have risen sharply over the past year as a result of a series of rate hikes. The benchmark yield on 10-year Treasury bills reached 4% on Wednesday for the first time since November. Shorter rates rose even higher, with 6-month and 1-year yields rising above 5% for the first time since 2007. Bond prices and yields move inversely.
“The Fed does indeed want stock prices to fall. They’ve made that clear,” Einhorn said. “I think it would be better if they cared less about the stock market in both directions.”
Einhorn just scored “an exceptionally good year” with a 36.6% return in 2022, thanks in part to his short position in a slew of innovative technology stocks such as those touted by growth investor Cathie Wood.
The hedge fund manager said in a recent investor letter that 2022 was in many ways his best year ever and that the period was most comparable to 2001, the year after the last tech bubble burst. He also revealed that he is still short on some “bubble” names.
The much-followed investor said his hedge fund is worth a relatively small net worth and that he is very confident in the value choices in his portfolio.
“I have a pretty conservative view of where the market would go, but I’m really excited about some of the positions in my long portfolio because they’re just ridiculously cheap and bring in tons of capital,” Einhorn said.
At the end of 2022, Greenlight’s largest long positions included Green Brick Partners, Brighthouse Financial and Consol Energy. He previously said that the top winners of his hedge fund in 2022 were Atlas Air Worldwide, Consol Energy, Teck Resources and merger arb play Twitter.
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