(Kitco News) - Rising inflation will continue to threaten U.S. equity markets and the economy, so the Federal Reserve needs to do everything to cool down rising prices, according to one billionaire investor.
In a flurry of tweets Tuesday, Bill Ackman, famed hedge fund manager of Pershing Square, said that the U.S. central bank needs to aggressively raise interest rates now.
"Until inflation is satisfactorily addressed investors don't know if and how long it will take the Fed to quell inflation. Uncertainty is the enemy of markets particularly in the short term," Ackman said on social media. "By raising rates aggressively now, the Fed can protect and enhance equity markets and the strength of the economy for all, while stymieing inflation that destroys livelihoods, particularly that of the least fortunate."
investors don’t know if and how long it will take the Fed to quell inflation. Uncertainty is the enemy of markets particularly in the short term. That is why I believe that the sooner and more aggressively the Fed raises rates to subdue inflation, the lower the risk of
- Bill Ackman (@BillAckman) May 24, 2022
The comments come as the S&P 500 continues to flirt with bear-market territory as inflation at a 40-year high threatens corporate earnings. The S&P 500 is seeing some reprieve Tuesday even as it trades below 4,000 points. However, many analysts have said that investors should look to sell rallies as prices could be heading lower as the U.S. central bank looks to cool the economy to subdue inflation.
"How does this downward market spiral end? It ends when the Fed puts a line in the sand on inflation and says it will do ‘whatever it takes," said Ackerman. "Markets are imploding because investors are not confident that the @federalreserve will stop inflation. If the Fed doesn't do its job, the market will do the Fed's job, and that is what is happening now."
buyers for stocks. How does this downward market spiral end? It ends when the Fed puts a line in the sand on inflation and says it will do ‘whatever it takes.’ And then demonstrates it is serious by immediately raising rates to neutral and committing to continue to
- Bill Ackman (@BillAckman) May 24, 2022
Currently, markets are looking for the Federal Reserve to raise interest rates by 50-basis points at the next three monetary policy meetings. According to the CME FedWatch Tool, markets see interest rates rising above 3% by the end of the year.
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| Gold price still on pace to push above $2,000 as stagflation, recession risks rise - In Gold We Trust |
While investors have been fleeing equity markets, safe-haven assets like gold have benefited, even with rising interest rates.
While equity markets have dropped around 18% so far this year, gold has outperformed, trading in roughly unchanged.
