Need to Know: Trade-war tension sent Druckenmiller flocking to U.S. bonds
We can maybe thank St. Louis Federal Reserve President James Bullard, who said Monday that U.S. interest rates may be too high given trade tensions — something financial markets have been screaming about. Note, on Tuesday Australia became the first developed central bank to cut rates in 2019, citing, yep, global trade jitters.
He was referring to President Donald Trump’s May 6 tweet that threatened Chinese tariffs. It sparked a move by investors to sell stocks and pour money into the perceived safety of government bonds. U.S.-China tension has worsened since that tweet, amid fears a full-blown trade war could trigger an American recession, with Trump’s recent tariff threat against Mexico not helping.
“So I think if you’re confident in your long-term view and ability to make money, this is not a great environment to be going and betting the ranch. Not short, not long,” Druckenmiller said. He’s known to employ a top-down investment style that involves trading very bullish or very bearish positions based on macroeconomic trends, something he’s clearly finding tough these days as well.
He’s not completely down on all equities though, saying firms that provide goods and services investors need through good and bad times, known as “secular growth companies” can do well in a “1% nominal growth environment” and are a good bet. He, once again, expressed his passion for cloud-based corporations.
He said China started easing up on its private sector last autumn and has been highly supportive of its own tech sector. “What are we doing? Oh, we’re saving, steel, coal, aluminum. What are we doing with our leading tech companies? We’re throwing sand in the gears and making their life miserable.”The market Dow YMM19, +0.61% S&P 500 ESM19, +0.60% and Nasdaq NQM19, +0.68% futures are moving higher. That’s after the Nasdaq COMP, -1.61% finished in correction territory on Monday.
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