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Stanley Druckenmiller has seen a crisis or two in his storied career.
The famed former hedge-fund manager, who with George Soros famously broke the Bank of England by shorting the pound in 1992, says “the risk-reward for equity is maybe as bad as I’ve seen it in my career.”
The S&P 500 SPX, -2.05% has climbed 28% from the lows of March, even in the face of data showing the economy, at best, plateauing after a severe downturn.
Speaking at a webinar run by The Economic Club of New York on Tuesday night, the chairman and chief executive of Duquesne Family Office says it is just not true that it is profitable to be on the side of the Federal Reserve, which has cut interest rates to nearly zero, swelled its balance sheet and initiated several emergency lending programs. He thinks stocks are at high multiples given the uncertainty of the current environment and looming bankruptcies.
All that said, he does concede the wild card to the market is that the Fed could step up its asset purchases. Druckenmiller says he doesn’t understand the point of negative interest rates, which last week briefly became the market expectation in futures markets. A number of Federal Reserve officials — including Cleveland Fed President Loretta Mester on Tuesday night — have said they are reluctant to set negative interest rates.
Druckenmiller says it doesn’t make sense that financial markets surge on news about the Gilead Sciences GILD, -3.52% intravenous anti-COVID-19 drug remdesivir. “I don’t see why anybody would change their behavior because there’s a viral drug out there,” he said.
Druckenmiller also revealed he’s a big fan of Amazon AMZN, -2.16%, saying he gets emotional when the online services giant is attacked.
The buzz
The focus will turn to Federal Reserve Chairman Jerome Powell, who will discuss the economy at a webinar run by the Peterson Institute for International Economics at 9 a.m. Eastern. “We expect Powell will lean against negative rates and lean in favor of the Fed’s main alternative instruments — enhanced forward guidance and regular QE / yield caps,” said economists at Evercore ISI.
As Fed officials continue to bat away the possibility of negative interest rates, the European Central Bank on Wednesday released a publication defending them, saying the boost to lending volumes and the creditworthiness of households offsets the negative impact on bank profitability.
U.K. gross domestic product fell 2% in the first quarter, the worst showing since the financial crisis.
Shipping giant A.P. Moeller-Maersk said volumes in the second quarter may fall as much as 20% to 25%.
Twitter TWTR, -1.81% Chief Executive Jack Dorsey told his employees on Tuesday that many of them will be allowed to work from home in perpetuity, according to BuzzFeed.
The market
After the 457-point drubbing the Dow industrials DJIA, -1.88% took on Tuesday after infectious-disease expert Dr. Anthony Fauci warned the Senate that reopening could lead to “suffering and death,” U.S. stock futures ES00, +0.53% YM00, +0.59% advanced.
Oil futures CL.1, +0.15% were lower.
In the currencies market, the kiwi USDNZD, +0.81% dropped as the Reserve Bank of New Zealand said negative rates were an option.
The chart
The U.K. Office for National Statistics composed a fascinating chart, showing first-quarter GDP as a function of how stringent lockdowns are. (The U.S. dot is just to the top of the U.K., and China’s dot is in the bottom right.) They used Oxford’s COVID-19 Government Response Tracker to measure lockdown strictness. For more interesting charts on the U.K. economic numbers — including the spike in toilet paper demand — see this story.
Random reads
The Federal Bureau of Investigation accidentally revealed the name of a Saudi official suspected of directing support for the 9/11 hijackers.
Shock jock Howard Stern says he hates Trump supporters — and so does the President.
Fossils suggest modern humans shared memes with Neanderthals.
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