Billionaire investor Stan Druckenmiller says we're on the brink of a recession and face a 'hard landing' as the Fed 'basically wasted all our bullets'

The downturn will occur at some point during the current quarter — even earlier than he previously expected, the billionaire founder of Duquesne Family Office said Tuesday during the 2023 Sohn Investment Conference. Druckenmiller, 69, said a variety of factors including a decline in retail sales and the upheaval gripping the nation’s regional banks prompted him to accelerate his forecast for a recession.

“I am not predicting something worse than 2008,” Druckenmiller said. Yet, to be a good risk manager, “it’s just naive not to be open-minded to something really, really bad happening.”

He defined a hard landing as unemployment exceeding 5%, corporate profits slumping at least 20% and rising bankruptcies. 

Druckenmiller, who managed money for billionaire George Soros for more than a decade, said it’s a challenging time to make economic forecasts and that he sees no “fat pitches” when it comes to offering investment ideas. His own stock portfolio is neither net long nor short, and he advises equity hedge funds to be conservative for now. 

“You’re going to have unbelievable opportunities in the next couple of years,” he said. “There’s a lot of dispersion within industries, and just make sure to preserve your capital until they present themselves.”

Given where Treasuries are trading in relation to the federal funds rate, Druckenmiller said the asset class is “off the table.” While he’s short the dollar, he said it’s not a “massive” position. Duquesne also owns gold and silver, he said. 

As the economy emerges from recession, he’s forecasting that copper, the housing industry, biotech firms and companies focusing on artificial intelligence could be big beneficiaries. 

Nvidia, Microsoft

“AI is very, very real and could be every bit as impactful as the internet,” said Druckenmiller, who owns Nvidia Corp. and Microsoft Corp. AI, he said, eventually may spawn $100 billion companies.

Druckenmiller has been a long-time critic of the Federal Reserve’s easy monetary and fiscal policy, especially in the past few years, when the economy was expanding.

Policymakers have left themselves less wiggle room compared with previous economic cycles, Druckenmiller said. 

“We basically wasted all our bullets,” he said.

Druckenmiller, who has repeatedly spoken about the dangers of unchecked future government spending, added that “it is a lie and it is a fantasy to say we don’t have to cut entitlements. The problem is we’re either going to cut them now or we’re going to cut them later,” and later will be much more costly.

Druckenmiller has a net worth of $9.9 billion, according to the Bloomberg Billionaires Index, a ranking of the world’s 500 richest people.