The economy has not changed a bit since the election……what is changing and changing fast is sentiment. Refer to this post from Davidson to see what can happen to the market when sentiment goes very positive…
Dr Copper is in the news again with Druckenmiller’s comments on CNBC. Demand did not suddenly materialize with Trump’s election. Only market psychology behaves in this fashion. Terry Lundgren, Macy’s CEO, called Druckenmiller a ‘brilliant forecaster’ on CNBC minutes after Druckenmiller’s comments. The shift in market psychology occurs suddenly. Often so quickly that, the majority of investors are caught like deer in headlights. Markets shift with psychology.
Value Investors are already positioned waiting for Momentum Investors to catch-up to fundamentals. Once Momentum Investors turn, they steamroll over anything in their way.
Drunkemiller (via CNBC):
Stan Druckenmiller: I’m optimistic about the future 1 Hour Ago | 03:52
“I sold all my gold on the night of the election,” the founder and former chairman of Duquesne Capital said in a “Squawk Box” interview.
He said he’s betting on growth by shorting bonds globally and he likes stocks that respond to growth. He also likes prospects for the dollar, especially against the euro.
This rosier outlook is in sharp contrast to what Druckenmiller said at the Sohn Investment Conference in New York in May. He told attendees they should sell their stock holdings. At the time, he said gold was his “largest currency allocation.”
In the past, Druckenmiller has been negative on the country’s growth prospects, but he said Thursday: “It’s as hopeful as I’ve been in a long time.” He added, “I would not be surprised if we’re not looking at the peak of the divisiveness.”
Since Republicans maintained control of the House and Senate while winning the White House, Druckenmiller said “this is the greatest chance” to get tax reform and regulation passed.
“[But] I hope economic policy is deferred to Mike Pence and Paul Ryan,” he said, referring to the vice president-elect and the speaker of the House. He pointed out he did not support Trump or Hillary Clinton. He had supported John Kasich for the Republican nomination.
“I don’t think Donald Trump is Ronald Reagan,” he added.
Druckenmiller said if he were Trump, he would not replace Federal Reserve Chair Janet Yellen before her four-term is up in 2018. Trump has indicated he would not look to reappoint Yellen, accusing her during the campaign of being motivated by politics.
As far as interest rates are concerned, he said markets are pointing to rates going up a lot. The Fed meets next month, and central bankers are widely expected to hike rates for the second time in a decade. The last rate increase was in December 2015.
Druckenmiller also said he believes the Trans-Pacific Partnership free trade deal, opposed by Trump, is good for business.