Stanley Druckenmiller Bear Market Forecast: The S&P 500 hit 3386.15 on February 19, 2020, and market forecasters were convinced that the rise would continue. Then, COVID-19 changed everything. By March 23rd, the S&P 500 was down nearly 34 percent. That day, it closed at just 2237.40.
Fortunately, the sharp drop was only temporary, and the S&P regained its strength rather quickly. Within months, it had exceeded its previous peak and then some. The 2020 bear market was brief, and investors hoped there wouldn’t be another one for several years.
Unfortunately, the next bear market followed less than two years later. The S&P 500 hit 4796.56 on January 3, 2022, before dropping nearly 22 percent. On June 13th, a new bear market was official when the S&P 500 hit 3749.63.
The big question now is when the bear market will end. After all, the most recent bear market was over in a few months. However, that was an anomaly. Bear markets last 19 months on average, and the 2000 bear market went on for 30.5 months.
Stanley Druckenmiller, who is widely considered one of the most successful investors of all time, predicted the current bear market a year before it came to pass. Followers are now looking to Druckenmiller for insight into when the bear market will end.
Who Is Stanley Druckenmiller?
Stanley Druckenmiller, net worth $6.8 billion, founded and led the wildly successful Duquesne Capital Management hedge fund for more than 30 years.
Duquesne Capital Management – and Druckenmiller himself – are most famous for never having a down year. In 2010, Druckenmiller decided to quit while he was still ahead. He closed down the fund and launched a new firm, the far smaller Duquesne Family Office.
Though Druckenmiller doesn’t manage billions in assets anymore, his track record makes him a sought-after consultant. He appears regularly on MSNBC, CNBC, and a variety of business programs.
Throughout 2021, he used his platform to warn against dangerous monetary policy and the likelihood of increased inflation, an impending bear market, and another recession.
Stanley Druckenmiller Interview
One of the most notable Stanley Druckenmiller quotes came in July 2021. Druckenmiller said:
If I was Darth Vader and I wanted to destroy the US economy, I would actually do aggressive spending in the middle of an already hot economy. Which is exactly what we have… This is the biggest bubble I have ever seen in my career.
He pointed out that between the dramatic increase in housing prices, the rising interest in crypto, NFTs, and SPACs – not to mention the fact that equity prices as a percent of GDP were higher than ever before – high inflation was inevitable, and it would undoubtedly go higher. Eventually, the whole mix would do what bubbles always do – burst – plunging the economy into a downward spiral.
His prediction came to pass in the months that followed. Inflation continues to rise, crypto prices have fallen dramatically, and housing prices are starting to come down.
So, what will the stock market do in 2022?
Stanley Druckenmiller Predicts When Bear Market Ends
Leading up to the 2022 bear market, Stanley Druckenmiller made it clear that he did not support the Federal Reserve’s easy money policies. He pointed to rising inflation and other economic indicators as evidence that market growth could not continue long-term.
In a May 2021 CNBC Squawk Box interview, Druckenmiller said that the Fed’s continued assertions that inflation would be “transitory” had investors “lulled into a false sense of security.” He warned that most investors would not heed the risks until they saw clear signals from the Fed that the days of easy money were over. By then, of course, it would be too late.
During the same interview, Druckenmiller said, “I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances, not one.”
By the end of the year, the Fed evidently agreed. It announced that there would be several interest rate hikes in 2022, and it followed up with action. Rates increased by 0.25 percent in March 2022 and another 0.50 percent increase in May 2022. In June 2022, rates went up an additional 0.75 percent, and it appears there are more planned.
However, rolling back the easy money policies of the COVID years came too late. Inflation is still rising, and there is no relief in sight. For the 12 months ending June 2022, inflation was up to 9.1 percent – a figure that exceeded the predictions of even the most seasoned analysts.
When asked for his perspective in June 2022, Druckenmiller said there are no signs that the bear market will be short-lived.
Aside from slow action by the Federal Reserve, a number of geopolitical factors are influencing economies on a global scale. Examples include China’s COVID lockdowns, the Russian invasion of Ukraine, and an asset bubble that is on the verge of bursting.
Druckenmiller said that the bear market has “a ways to run,” and he went on to say that recession is practically inevitable. Based on historical patterns, when inflation goes above five percent, a recession follows. Druckenmiller noted that the recession will probably be at its worst in 2023.
Are There Any Recession-Proof Stocks?
The good news is that investors can minimize the impact of a downturn on their portfolios by prioritizing stocks that can weather poor market conditions.
Generally speaking, consumer staples, energy, home improvement/construction, and healthcare companies don’t suffer as much as the rest of the market when budgets get tight because they offer must-have goods and services that consumers won’t do without.
Recession-resistant stocks worth considering include:
- Abbott Laboratories
- Home Depot
- Johnson & Johnson
- Kraft Heinz
- NextEra Energy
- Procter & Gamble
- UnitedHealth Group
Investors can also focus on stocks that pay reliable dividends, as reinvestment of dividends can boost returns when stock prices remain stagnant.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.