(Money and Markets) Former Duquesne Capital Chair and billionaire hedge fund manager Stanley Druckenmiller says he dumped all of his stocks and bought Treasurys after President Donald Trump’s tweet in May that escalated the ongoing trade war with China.
“When the Trump tweet went out, I went from 93% invested to net flat and bought a bunch of Treasurys,” Druckenmiller said. “Not because I’m trying to make money, I just I don’t want to play in this environment.”
Druckenmiller has a long, profitable track record of beating the market, netting annualized returns of 30% for clients during his career, earning himself nearly $5 billion in the process.
The tweet in question is a two-parter from May 5 in which he announced tariffs on $200 billion worth of Chinese imports would rise from 10% to 25%, blaming China for attempting to “renegotiate.”
For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods,” Trump tweeted. “These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”
And that was it, Druckenmiller knew he had to get out of equities from that statement alone. Since then, May finished its worst month since 2010, the S&P 500 sank more than 6.5% and the Dow Jones Industrial lost more than 1,600 points and finished six straight losing weeks on Friday, May 31.
Druckenmiller said he’s concerned that Trump’s take-no-prisoners tariffs strategy will backfire, damaging the U.S. economy to the point he will lose to a “crazy,” far-left Democrat in the 2020 election after key swing states that voted for him go Democrat.
“I did not expect the lovely tweet that interrupted my golf game on Sunday afternoon about a month ago,” he joked.
Druckenmiller said Trump is making a mistake and “wants to run on tariffs. He thinks they are a winning formula in the swing states and the belligerent, sort of verbose pressure he’s putting — and the braggadocio toward China — he’s giving Xi Jinping no off-ramp to make a deal.”
So which way will the market go now? Druckenmiller said he’ll watch from the sidelines until things calm down.
“I actually own a lot of Treasurys and when I bought them I wasn’t sure rates were going to go down,” he said. “What I was sure was that they weren’t going to go up.”