David Einhorn of Greenlight Capital said on Wednesday that he was maintaining his negative stance on the stock market as inflation and interest rates could rise.
“I think we should be bearish on equities and bullish on inflation,” Einhorn said on CNBC’s “Halftime Report.” “I think we’re in a policy now, which is probably good enough for Main Street, but it’s going to be tough and getting tougher for financial assets.”
The star hedge fund manager believes the Federal Reserve may have more work to do to combat lingering price pressures, raising interest rates even higher than consensus expectations. The central bank cut interest rates to a target range of 4.5% to 4.75%, the highest since October 2007.
“I think both long-term and short-term rates are higher and probably higher than people expect,” Einhorn said.
Treasury yields have jumped over the past year following a series of rate hikes. The benchmark 10-year Treasury yield rose above 4% on Wednesday for the first time since November. Short-term rates rose further, with 6-month and 1-year yields exceeding 5% for the first time since 2007. Bond prices and yields are moving in opposite directions.
“The Fed wants stock prices to go down. They’ve made that clear,” Einhorn said. “I think it would be better if they cared less about the stock market both ways.”
Einhorn just scored “an exceptionally good year” with a 36.6% return in 2022, thanks in part to its short position in a slew of innovative tech stocks like those touted by growth investor Cathie Wood.
The hedge fund manager said in a recent letter to investors that 2022 was in many ways its best year and the period most comparable to 2001, the year after the last tech bubble burst. He also revealed that he was still missing some “bubble” names.
The widely followed investor said his hedge fund was net long by a relatively small amount and had strong conviction in his portfolio value picks.
“I have a pretty conservative view of where the overall market would go, but I’m very excited about a number of positions in my long portfolio because they’re just ridiculously cheap and fetching tons of capital,” he said. Einhorn said.
At the end of 2022, Greenlight’s largest long position included Green Brick Partners, Brighthouse Financial and Consol Energy. He previously said his hedge fund’s top winners in 2022 include Atlas Air Worldwide, Consol Energy, Teck Resources and the arb play Twitter merger.