Why Stanley Druckenmiller Says The Market Is In The Midst Of “Absolute Raging Mania”

And the veteran investor says the mania is set to crash and burn…

Even as the market has taken a tumble this week, veteran investor Stanley Druckenmiller said this week that the stock market has fallen into a mania fueled by the Federal Reserve and wild investor speculation.

And that mania will end badly in the years to come.

“Everybody loves a party… but, inevitably, after a big party there’s a hangover,” Druckenmiller said. “Right now, we’re in an absolute raging mania. We’ve got commentators encouraging companies to do stock splits. Companies then go up 50%, 30%, 40%, on stock splits. That brings no value, but the stocks go up.”

Both Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA) recently announced stock splits, and both stocks skyrocketed following their announcements, with Apple shares jumping 34.2% within a month of announcing its 4-for-1 stock split and Tesla rising 82.5% after it announced its 5-for-1 split.

Furthermore, after the market hit bottom on March 23, the S&P 500 index gained 60% at its peak last week—even amid the raging coronavirus pandemic and subsequent economic collapse—before falling -7% over the last week. 

“I have no clue where the market is going to go in the near term,” Druckenmiller said. “I don’t know whether it’s going to go up 10%; I don’t know whether it’s going to go down 10%. But I would say the next three to five years are going to be very, very challenging.”

Druckenmiller attributes the market’s massive move higher over the last several moths in large part to the measures taken up by the Federal Reserve in reaction to the coronavirus crisis. 

While Druckenmiller says the Fed has done a “great job” since March by cutting its benchmark rate to 0% and launching an unprecedented stimulus effort to sustain the economy, the resulting market rally “has been excessive.”

Not only that, but for the first time in a long time, Druckenmiller is concerned about inflation skyrocketing.

“The merging of the Fed and the Treasury, which is effectively what’s happening during COVID, sets a precedent that we’ve never seen since the Fed got its independence,” Druckenmiller said. “It’s obviously creating a massive, massive mania in financial assets.”

Trending Ideas

Featured Stocks On The Move

Daily Rundown

Top 3 Stocks in Leading Sectors
  • 3 Gas Distribution Stocks To Buy Now

    New Jersey Resources Corporation (NJR) New Jersey Resources Corporation is an energy services holding company that provides regulated natural gas distribution services through its subsidiary, New Jersey Natural Gas. The... Read More

  • 3 Food Product Stocks To Buy Now

    The Chefs’ Warehouse, Inc. (CHEF) The Chefs’ Warehouse, Inc. is a premier distributor of specialty food products, serving high-end restaurants, hotels, and gourmet food stores across the United States and... Read More

  • 3 HVAC Stocks To Buy Now

    Featured Content Lennox International Inc. (LII) Lennox International Inc. is a global leader in energy-efficient climate control solutions, specializing in heating, ventilation, air conditioning, and refrigeration (HVACR) products. The company... Read More

  • 3 Hotel Stocks To Buy Now

    Featured Content Hyatt Hotels Corporation (H) Hyatt Hotels Corporation operates a global portfolio of luxury, full-service, and lifestyle hotels, as well as vacation properties. Known for its premium hospitality offerings,... Read More

  • 3 Tobacco Stocks To Buy Now

    Featured Content Turning Point Brands, Inc. (TPB) Turning Point Brands, Inc. is a consumer products company that manufactures and markets tobacco products and alternative smoking accessories. The company’s portfolio includes... Read More

  • 3 Life Insurance Stocks To Buy Now

    Featured Content F&G Annuities & Life, Inc. (FG) F&G Annuities & Life, Inc. specializes in annuities and life insurance products designed to meet the long-term financial planning needs of clients.... Read More

  • 3 Soft Beverage Stocks To Buy Now

    Featured Content Westrock Coffee Company (WEST) Westrock Coffee Company is a leading integrated coffee, tea, and extract service provider, offering comprehensive solutions from sourcing and roasting to packaging and distribution.... Read More

  • 3 Medical Info System Stocks To Buy Now

    Featured Content Clover Health Investments, Corp. (CLOV) Clover Health Investments, Corp. is a healthcare technology company focused on improving health outcomes for America’s seniors. The company offers Medicare Advantage plans... Read More

  • 3 Electric Power Stocks To Buy Now

    Featured Content Hawaiian Electric Industries, Inc. (HE) Hawaiian Electric Industries, Inc. is a holding company that provides electric utility services and financial services in Hawaii. Through its subsidiaries, it supplies... Read More

  • 3 Bank Stocks To Buy Now

    Featured Content Comerica Incorporated (CMA) Comerica Incorporated is a financial services company headquartered in Dallas, Texas, offering a range of banking products and services, including commercial and retail banking, wealth... Read More

  • 3 Machinery Stocks To Buy Now

    Featured Content Alta Equipment Group Inc. (ALTG) Alta Equipment Group Inc. is an integrated equipment dealership platform in the United States, operating through three segments: Material Handling, Construction Equipment, and... Read More

  • 3 Silver Stocks To Buy Now

    Featured Content Gatos Silver, Inc. (GATO) Gatos Silver, Inc. is a precious metals mining company primarily focused on silver and zinc production. Its flagship Cerro Los Gatos mine in Mexico... Read More