Druckenmiller: Markets Could Be Flat Next 10 Yrs

Investment Analysis Clubs Destiny Solutions Corporation
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Insider Monkey/Yahoo headline: Market Could be “Flat” for 10 Years: Druckenmiller’s Prediction and His 10 Defensive Stock Picks

Usman Kabir
Thu, September 22, 2022 at 9:03 AM

https://finance.yahoo.com/news/market-could-flat-10-years-13…

Insider Monkey
Market Could be “Flat” for 10 Years: Druckenmiller’s Prediction and His 10 Defensive Stock Picks


Place     Symbol

10.       $CVE

9.        $MRNA

8.        $TECK

7.        $FCX

6.        $PXD

5.        $CVX

4.        $AR

3.        $LLY

2.        $TMUS

1.        $MSFT

Stanley Druckenmiller of Duquesne Capital is one of the most famous investors on Wall Street, having averaged returns of over 30% in a more than two-decade period between the late 1980s and early 2010s as a money manager. His fund, now a family office, manages an equity portfolio worth more than $1.3 billion as of the end of the second quarter of 2022. Some of the top defensive stocks in the Stanley Druckenmiller portfolio include Chevron Corporation (NYSE:CVX), T-Mobile US, Inc. (NASDAQ:TMUS), and Eli Lilly and Company (NYSE:LLY). Defensive stocks are the safest bets to play the highly volatile stock market.

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“There’s a high probability in my mind that the market, at best, is going to be kind of flat for 10 years, sort of like this '66 to '82 time period.”

Druckenmiller added that “this is the hardest environment I have encountered to forecast” and it mimicked the market conditions between 1966 and 1982. The money manager claimed that rising inflation, interest rate hikes, and the ongoing Ukraine-Russia war, in addition to reversing globalization were some of the reasons that were likely to lead to a global recession within the next few years. Regarding US-China relations, Druckenmiller is of the view that the cold war seems to be turning into a hot war. He also believes that the US-China relations were at their best under President Trump’s regime. He noted that the market conditions that had created a bull market in the US after 1982 had not only stopped but were reversing.

Our Methodology (Tip Ranks, that is)

The companies listed below were picked from the investment portfolio of Duquesne Capital at the end of the second quarter of 2022. Stocks that operate in defensive sectors like energy, consumer staples, and pharma were preferred for the list. The analyst ratings and business fundamentals of the firms are also discussed to provide readers with some additional context for their investment choices. The hedge fund sentiment around each stock was calculated using the data of around 900 hedge funds tracked by Insider Monkey in the second quarter of 2022.

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I’m reminded of the old sage from years ago who predicted that stock prices will fluxuate. And no doubt money will be made in the process. Whether or not markets are “flat.”

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He also believes that the US-China relations were at their best under President Trump’s regime

While that’s likely true, that is mostly because for the prior 20 years the laissez-faire voices had shouted down any attempt to tell US businesses that they should 1) keep their business within the US, 2) hire US workers, 3) consider strategic implications of outsourcing everything, and 4) and so on.

Finally in 2020 Trump instituted sanctions against many Chinese companies, making it illegal for US retail and institutional investors to prop up Chinese corporations (5 of 44 were delisted from American exchanges within months), and the pandemic finally woke up CEOs that having all their production in Asia while keeping a nominal US brand name and ad agency in New York probably wasn’t the best idea going forward.

Finally, and at last, the increasing truculence of China coupled with the Ukrainian invasion and the pandemic has started shifting production back home, and while that is likely to be a long and costly process, it’s one that is necessary - and can’t come too soon.

I remember a decade ago being told (on the Berkshire board, although I can’t find the post just now) that we should let China (et.al.) subsidize their industries and we should reap the rewards, because, well, it makes things cheaper for us. Never mind that we put ourselves in the position of not having rockets capable of lifting satellites into orbit (we paid Russia for that) or having the ability to make solar panels or flat screens or rare earths industries (just a couple of examples of American businesses which barely clung on.)

So yeah, great relations with China. Maybe not so great with American industry, but why would that matter?

In any event he might be right. I don’t agree with all of his list, but certainly some of it: oil (energy), software (MSFT?), drugs (CVS) and so on. No brainers, actually, but then they always have been . Let the others chase the golden rainbows. Some will shine, many will crash. Pick the stalwarts, calm down, be happy.

I guess I find this a pretty easy period to forecast, not “the hardest environment” ever. But that’s just me, and he’s a big cheese, so he gets the headlines.