Cailianshe (Shanghai, editor Ale) reported that Bill Ackman, manager of billionaire hedge fund and founder of Pershing Square Capital Management, called on Fed to withdraw as soon as possible from monetary policy support provided to the US economy during the pandemic.
He wrote on Twitter, "I shared our views on inflation and monetary policy with last week. Our conclusion is: The Fed should immediately reduce the scale of bond purchases and start rate hikes as soon as possible. " He added, "We are still 'continue playing music and dance', and now is the time to turn off the music and calm down."
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Ackerman called for the scale of bond purchases to be reduced as soon as possible (Taper) and rate hikes are coming as the Federal Open Market Committee (FOMC) will start its two-day policy meeting next Tuesday. Currently, the market expects FOMC to announce a reduction in its monthly bond purchase plan next Wednesday. Most investors believe that starting from November, the purchase of $10 billion in Treasury bonds and $5 billion in mortgage-backed securities will be reduced every month, completing all reductions next summer.
For Ackerman, sticking to Taper is not a radical thing, but it is more important to call for a rate hike. The Fed has kept its benchmark interest rate near zero since the COVID-19 pandemic, and most FOMC officials have said the first rate hike will not be earlier than the end of 2022.
However, according to CME's FedWatch tool, traders have recently made more aggressive pricing of the Fed's interest rate. The futures contract points out that the Fed raises interest rates by at least 50 basis points in 2022, and there is still a 50% chance of hikes again in December. Ackerman said he has also begun to position his portfolio for higher interest rates.
(Photo source: FedWatch)
Ackerman wrote on Twitter, "As we disclosed earlier, we have invested our funds in the risk of hedging interest rate rise, because we believe that rising interest rates may negatively affect our long stock portfolio."
According to the company's statement, Pershing Square's total return in 2021 was 15.7%, and this year it was 12.2%, lagging behind the S&P 500's 22.5%. The fund achieved brilliant results in 2020 with a net return of 70.2%.
Data released by the U.S. Department of Commerce before the market showed that although personal income fell by 1% in September, a drop of more than expected by 0.4%, the annual inflation rate in September grew at its fastest pace in more than 30 years. The U.S. Personal Consumer Expenditure Price Index (PCE) rose 0.4% in September, up 4.4% year-on-year, the fastest growth rate since January 1991.
The inflation indicator favored by the Federal Reserve - Core personal consumption expenditure price index (PCE), which excludes food and energy costs, rose 0.2% in the month, up 3.6% year-on-year. The data in September was consistent with the year-on-year growth rate in August, continuing the highest level in the past 30 years. Since 2012, the Federal Reserve has set the annual increase in core PCE by 2% as its long-term inflation target.
Due to market expectations that high inflation will force the Fed to implement monetary tightening policies faster and more urgently, the dollar index rose by more than 1% in 4 days, reaching a new high since October 13, and the current situation fell to 94.11.
