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Billionaire David Tepper Is Betting Against the Stock Market Because of the Fed

David Tepper, co-founder of the hedge fund Appaloosa Management.

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Andrew Harrer/Bloomberg

Appaloosa Management’s David Tepper says he is worried further tightening of monetary policies from global central banks will hurt the stock market.

“I’m leaning short on the equity markets. I think the upside/downside [risk here] just doesn’t make sense to me when I have so many central banks telling me what they are going to do,” the hedge fund manager said Thursday on CNBC’s Squawk Box. “This is a tough level [for the S&P 500] to talk about robust returns.”

Tepper is considered one of the most respected hedge fund managers in the business and is known for his accurate market predictions following the last financial crisis.

Tepper said Thursday that the Federal Reserve and the European Central Bank have signaled to investors they intend to continue to raise interest rates going forward. While inflation for physical goods has come down, Tepper says central bankers are more concerned about the stubbornness of services inflation on the back of a structural labor shortage.

Central banks “are going to keep rates high for a while,” Tepper told CNBC. “Don’t ignore what these guys are saying.”

The billionaire hedge fund manager is also the owner of the National Football League’s Carolina Panthers.

The
S&P 500
fell by 1.5% in early trading Thursday. The market index has declined by about 20% this year after the Federal Reserve implemented a more hawkish monetary policy to battle inflation, which has driven interest rates higher. Higher rates reduce the value of profits farther out in the future and have a negative impact on stock valuation multiples.

According to Tepper, the pain for investors doesn’t seem to be over.

Write to Tae Kim at tae.kim@barrons.com

Credit: marketwatch.com

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