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How far is Bill Ackman right while thinking the Stock Market will collapse if the Fed does not hike rates aggressively?

www.thecoinrepublic.com 27 May 2022 15:00, UTC
Reading time: ~3 m

Pershing Square Capital’s founder Bill Ackman thinks that inflation is uncontrollable and Federal Reserves should act aggressively on monetary tightening.

Bill Ackman, Founder of Pershing Square Capital Management and Billionaire hedge fund manager tweeted this Tuesday about the situation that could be made up if nothing has been done to control the inflation. Bill Ackman wrote that inflation is getting out of control along with its expectations of getting in control. Bill Ackman further explained that currently, markets are collapsing violently where investors are not confident about the Federal Reserve’s efforts to stop inflation. 

Bill Ackman, the ‘activist manager’ further said that if the Fed is not going to do its job, then the market will do it by itself, and that’s exactly what is happening now. Bill Ackman further added that there is the only way to put a brake on this raging inflation to tighten the monetary policies aggressively, or that would result in the economy’s collapse. 

While putting up the statistics, Bill Ackman said that we see job openings like never before, along with the unemployment of 3.6%. There is an imbalance in supply and demand in energy, agriculture, food, housing, labor, etc.

Bill Ackman added that considering the wage-price spiral ahead, it would not be possible to reduce material inflation other than aggressive hikes in interest rates by Federal Reserves. Otherwise, the stock market is going to crash. That would act as a catalyst for a collapse in the economy and destruction in demand. 

These thoughts are not coming from Bill Ackman alone; rather, other people like famous economist Peter Schiff also have such extreme thoughts about the same. According to Schiff, inflation is going to happen regardless of any actions the Fed takes. While putting the thoughts similar to Bill Ackman, he said that it’s not the time to think about why inflation is currently high; instead, it’s time to think about why it’s been low throughout the past. 

Schiff believes that once we get how inflation has entered the economy and understand the long lingering of rising asset prices and consumer goods prices, it will be quite easy to understand the reason for high inflation to stay here for long. 

Such reactions from industry experts like Bill Ackman could be the result of the recent headlines that were talking about the aggression of Jerome Powell, Chairperson of Federal Reserves, with the monetary policy. He will be implementing an interest rates hike and revealed that the central bank would also tighten the purchases of large assets this summer. On the contrary, many financial experts and economists think that the Fed could not do this job. 

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