David Tepper remains bullish on stocks despite global economic growth forecast to decelerate in the second half of this year and 2022.
The US, the world’s largest economy, with T20.8 USD GDP (2020), is expected to grow 3.3% in 2022 and then 2.4% in 2023, according to the Fed’s forecast.
China in second place is hot on the heels, with T15.2 USD GDP making it the second-largest economy. China’s economy is expected to grow more than 6% this year and will moderate to 5.5% next year, according to the poll.
David Tepper is a big fish in a big pond. In the 2012 tax year, Institutional Investor’s Alpha ranked David Tepper first for earning a $2.2 billion paycheck, marking him the 4th highest-earning hedge fund manager.
“David Tepper is a big fish in a big pond. In the 2012 tax year, Institutional Investor’s Alpha ranked David Tepper first for earning a $2.2 billion paycheck”
WEALTH TRAINING COMPANY
David Tepper remains bullish and, bearing in mind the Appaloosa chief’s winning track record, his risk-on sentiment is not to be scoffed at
“I think the stock market is still fine for now,” said David Tepper in a business interview.
But that was a few months ago, which is a long time for short-term speculators, traders.
Nevertheless, David Tepper remains bullish going into Autumn, despite September being notoriously one of the worse months for stocks.
The rationale for David Tepper’s bullish view is that the legendary investor thinks the Federal Reserve knows what they are doing
In other words, the Fed has got its finger on the market pulse and the economy and is somehow able to implement effective monetary policy in anticipation of trouble ahead.
Could the Fed be using big data and artificial intelligence to enhance its policymaking?
So, Hedge fund legend David Tepper thinks the Federal Reserve did a fine job, showing that policymakers are not asleep at the wheel.
“I think the stock market is still fine for now”
Even the transition of the Fed’s monetary policy, from an accommodative stance to normalization, does not dampen David Tepper remains bullish view
David Tepper thinks the Fed probably will not start tapering its quantitative easing bond-buying program until later this year. But he said that when the Fed eventually decides to move to a normalized policy, that will mean that the economy is in a really good spot, according to David Tepper.
So, David Tepper is placing his confidence in the Fed’s ability to know when the economy and stocks can move forward without the need for monetary accommodation, also known as emergency monetary policy.
Since the financial crisis of 2008 and the Great Recession, central banks have embarked on the greatest monetary easing experiment in the history of finance.
More than 20T USD of currency was created by the major central banks to purchase bonds and in some cases even stocks, the program is known as quantitative easing QE, which facilitated expansionary fiscal policy.
“Recessions usually occur when central banks decide to tighten monetary policy too early to combat inflation” – Wealth Training Company
The 2020 pandemic global lockdowns accelerated QE and government deficits.
But pandemic global lockdowns highlighted the necessity of a central bank system and fiat currency. What would have happened during the pandemic if central banks did not exist with the economy in freefall and a business downturn worse than the great depression? We would have seen human misery, homelessness, famine-like never before in advanced economies. Financial meltdown, savers and investors wiped out, a bankrupt government with cheques bouncing and no essential public services. We would have been in a mad max scenario without the central banks’ QE.
Sure, the Fed is probably the most powerful institution on the planet, its yield targeting impacts the cost of borrowing on a global scale. It owns the copyrights to USD, the world’s reserve currency. No other institution impacts so many people directly or indirectly within the US and beyond with their policy.
Power tends to corrupt, and absolute power corrupts absolutely. So more central bank accountability would be a good idea.
Recessions usually occur when central banks decide to tighten monetary policy too early to combat inflation.
Policy time-lag, of twelve months, heightens the risk that policymakers implement monetary easing, which becomes effective a year later when the economy is already slow downing down.
“David Tepper remains bullish despite rising inflation and monetary easing fears” – Wealth Training Company
The tightening in a slowdown triggers a recession, depression
For example, the Gulf War recession (July 1990 to March 1991) was a mild recession that was triggered in 1990, as the Fed had been slowly raising interest rates for over two years to keep inflation in check.
The energy crisis recession (July 1981 to November 1982) having emerged from a recession just a year before the Fed tried to tame rising inflation with stricter monetary policy and raised interest rates and slowed the economy. Inflation fell to around 4% by 1983, but the cost was a 16-month recession that saw GDP drop by around 3% and unemployment spiked to 10.8%.
The 1980 Recession (January 1980 to July 1980)
Inflation rates rose throughout the late-1970s, reaching double-digit levels in 1979 and peaking at 22% in 1980. As a result, the Fed raised interest rates to stop the rising inflation. But GDP dropped by over 2%.
The Recession of 1969-1970 (December 1969 to November 1970) The long economic expansion saw inflation rise by the end of the decade. So, the Fed tightened its monetary policy, raising rates, and the Nixon Administration moved to cut government spending. A mild recession followed with GDP dropping less than 1% before the Fed eased its monetary policies to restart economic growth in 1970.
The Post-Korean War recession (July 1953 to May 1954)
The Fed tightened monetary policy to curb inflation (which includes increasing interest rates). But the spike in interest rates dampened consumer confidence, which decreased consumer demand. A 10-month recession soon followed.
David Tepper remains bullish despite rising inflation and monetary easing fears, and if history is anything to go by, that is a bold call
But who knows, maybe technology, big data, and AI will help to fine-tune monetary policy too. Perhaps the Fed-driven stock rally, which has come to be known as the “Tepper rally” will continue.