Hedge fund manager David Tepper has turned somewhat bearish in the stock market, citing uncertainty about interest rates and inflation.
“I don’t think it’s a great investment here,” Tepper said Friday on CNBC’s “Halftime Report.” “I just don’t know how interest rates will behave next year… I don’t think there are any great asset classes right now… I don’t like stocks. I don’t like bonds. I don’t like junk bonds.”
The Federal Reserve has been keeping the benchmark short-term interest rate steady near zero since the start of the pandemic. In recent weeks, officials have indicated that they are ready to begin reducing monthly asset purchases, possibly beginning in November.
Many believe that rising inflation, which is at a 30-year high, could pressure the central bank to undo some super easy monetary policy soon. Traders have raised their bets that the Fed will move faster than expected with a rate hike, as market prices point to an initial rate hike in September 2022, according to CME’s FedWatch tracker.
The founder of Appaloosa Management, whose comments have been known to move markets, said his hedge fund has been “probably very conservative” this year, but has done well because of its bets on commodities and oil.
“We continued to keep that exposure relatively low, but we kept investing, and I think investing in the stock market is somewhat, but you don’t have the highest concentration you have ever had,” Tepper said.
Tepper stressed, however, that there is nowhere near the right time to sell the stock market, and he still believes that stocks make a great long-term investment that everyone should have in their portfolios.
The hedge fund manager said that if bond yields remain stable after the Fed moves to scale back its bond-buying program, stocks could see a rebound.
“If we’re going to sit here at 1.60%. [on the 10-year Treasury yield] After the Fed announces tapering, you can then have a rally. There may be an uptick in trading. You may get an increase of 5% to 10%. “I’ll go in and out,” Tipper said.
The billionaire investor has made a number of insightful calls recently, including anticipating a market crash due to the Covid-19 pandemic. Back in February 2020, before the S&P 500 crashed into a bear market, he warned that the virus could be a game-changer for markets and “definitely destroy the environment” for stocks.
In March of this year, Tepper turned to the upside in the market, saying that it is very difficult to be bearish on the stock. The S&P 500 enjoyed seven consecutive positive months from February to August, and the index rose more than 20%, hitting an all-time high on Friday.