Billionaire investor Bill Ackman explains why share market is imploding- Investors lose confidence in US Fed
时间:2024-06-26 08:16:39 阅读(143)
Billionaire investor Bill Ackman said that the inflation is going out of control, and the US stock markets are imploding as investors are not confident that the US Federal Reserve will be able to tame it. Pointing out the rock and a hard place situation that the US economy is facing, Bill Ackman said the US Fed needs to put the ‘inflation genie’ back in the bottle by aggressively tightening its monetary policy and hiking interest rates. The other alternative to control raging inflation is if the stock market crashes, however, that will catalyze an “economic collapse” and cause “demand destruction”, Ackman added.
“The only way to stop today’s raging inflation is with aggressive monetary tightening or with a collapse in the economy,” Ackman said in a tweet Tuesday. “With today’s unprecedented job openings, 3.6% unemployment, long-term supply/demand imbalances in energy, ag and food, housing, and labor, and with the wage-price spiral that is underway, there is no prospect for a material reduction in inflation unless the Fed aggressively raises rates, or the stock market crashes, catalyzing an economic collapse and demand destruction,” he added.
According to the latest readings, US inflation is currently close to a 40-year high; it has put pressure on consumers to afford necessities including food, shelter and fuel. At the same time, the US economy is also facing high unemployment and has not recovered fully in comparison to its counterparts. Economists have indicated a hike in interest rates could hit spending and may lead to at least a mild recession.
“There is no economic precedent for 200 to 300 bps of fed funds addressing 8% inflation with employment at 3.6%. Current Fed policy and guidance are setting us up for double-digit sustained inflation that can only be forestalled by a market collapse or a massive increase in rates. That is why I believe there are no buyers for stocks,” the hedge fund manager and the chief executive of Pershing Square Capital Management said.
Nasdaq closed nearly 3 per cent on Tuesday and year to date the tech-heavy index is down over 27 per cent. In comparison, S&P 500 closed 1.7 per cent and Dow closed 0.85 per cent in the last trading session on Tuesday. So far this year, S&P 500 has slumped nearly 18 per cent and Dow is down nearly 13 per cent.
Ackman said the “downward market spiral” can end when the US Fed puts a line in the sand on inflation and says it will do ‘whatever it takes.’ The Fed must demonstrate it is serious by immediately raising rates to neutral and committing to continue to raise rates until the inflation genie is back in the bottle, he added.
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- tions and academic institutions have computed logistics costs, which are widely quoted to stress the point that India is a country with high logistics costs.” In addition to the ones I mentioned earlier, NCAER cites three—Armstrong and Associates (2017), an estimate of 13% of GDP; CII (2015), an estimate of 10.9% of GVA; and NCAER (2019), an estimate of 8.9% of GVA. Clearly, there are variations in what is being measured and how. This new NCAER report uses supply and use tables. What does it find? In 2021-22, logistics costs had an estimated range of between 7.8% and 8.9%. In 2014-15, they had an estimated range of between 8.3% and 9.4%. There has been a decline over time (with a transient increase in 2017-18 and 2018-19). It cannot be anyone’s case that this new NCAER report is the last word on the subject. But it is a beginning, with a clear methodology. And two points emerge. First, logistics costs aren’t as bad as they are often made out to be. Second, they have declined over time (also evident from LPI).
Logistics, good or bad, are driven by the states and the commerce ministry has a LEADS (Logistics Ease Across Different States) report, based on perceptions. The 2023 version was released in December. Since states are heterogenous, in the reporting, they are divided into four groups—coastal, landlocked, north-east, and UTs. States that do well are called achievers. Nomenclature matters. Thus, states that are middling aren’t called average. They are called fast movers. States that are sub-par are called aspirers. Let me highlight coastal states, since 75% of export cargo is estimated to originate from them. Among coastal states, ones that do well are Andhra Pradesh, Gujarat, Karnataka, and Tamil Nadu. The ones that lag are Goa, Odisha, and West Bengal. While India’s logistics performance may have improved over time, that’s not true of every state. Some have slipped. Most states have a state-level logistics policy, including Goa and Odisha. West Bengal, bottom of the pecking order in the coastal category, doesn’t have one. To quote from LEADS 2023, “Looking ahead, the State (West Bengal) could benefit from formulating a State Logistics Master Plan and State Logistics Policy to drive efficiency improvements and facilitate investments within the logistics sector and undertake consultation with the logistics stakeholders for educating and informing them about the initiatives State is undertaking for the development and improvement of logistics sector.”
Logistics has been talked about for a long time and India has also focused on improving performance. We are now getting some precise data on measurement and quantification. That helps.
Bibek Debroy, chairman, EAC-PM. Views are personal.
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