Greenlight Capital’s David Einhorn said Wednesday he’s keeping his negative stance on the stock market as inflation and rates of interest could shoot higher.
“I feel we should always be bearish on stocks and bullish on inflation,” Einhorn said on CNBC’s “Halftime Report.” “I feel we’re in a policy now, which might be pretty good for Primary Street, but it may be difficult and increasingly difficult for financial assets.”
The star hedge fund manager believes the Federal Reserve could have more work to do to combat stubborn price pressures, lifting rates of interest even higher than consensus expectations. The central bank has taken rates of interest to a goal range of 4.5%-4.75%, the very best since October 2007.
“I feel that each long- and short-term rates are headed higher and possibly higher than what persons are expecting,” Einhorn said.
Treasury yields have surged over the past 12 months on the back of a series rate hikes. The benchmark 10-year Treasury yield on Wednesday topped 4% for the primary time since November. Shorter-term rates surged even higher, with 6-month and 1-year yields topping 5% for the primary time since 2007. Bond prices and yields move inversely.
“The Fed does want stock prices lower. They’ve made that clear,” Einhorn said. “I feel it could be higher in the event that they cared less in regards to the stock market in either direction.”
Einhorn just scored “an exceptionally good 12 months” with a 36.6% return in 2022, thanks partly to his short position in a slew of progressive technology stocks like those touted by growth investor Cathie Wood.
The hedge fund manager said in a recent investor letter that 2022 in some ways was his best 12 months ever and the period was most comparable to 2001, the 12 months after the last tech bubble popped. He also revealed that he continues to be short some “bubble” names.
The widely followed investor said his hedge fund is net long by a comparatively small amount and he has a powerful conviction in the worth picks in his portfolio.
“I even have a reasonably conservative view towards which way the general market would go, but I’m very enthusiastic about a lot of the positions in my long portfolio because they’re just ridiculously inexpensive and returning tons of capital,” Einhorn said.
At the tip of 2022, Greenlight’s biggest long position included Green Brick Partners, Brighthouse Financial and Consol Energy. He previously said his hedge fund’s significant winners in 2022 included Atlas Air Worldwide, Consol Energy, Teck Resources and merger arbitrage play Twitter.
