Bloomberg News reports that Bill Ackman, the billionaire investor, bets that the Federal Reserve will start cutting interest rates much sooner than the market expects.
Bill Ackman’s Bets
The founder of Pershing Square Capital Management stated that a move of this kind must come under consideration as soon as the first quarter. As such, traders have started pricing in a curb in the rates sometime in June. However, according to market data, there is also a possibility of a rate cut in May by as much as 80%.
Rising Rates
The Federal Reserve started to increase rates aggressively in March 2022. This led to the fastest-ever rise in interest rates in the last 40 years. The central bank is yet to cut rates even as inflation in the United States is slowing down in the current year.
In an upcoming episode of The David Rubenstein Show: Peer-to-Peer Conversations, Ackman will explain that the real interest rate is impacting the economy and keeps increasing with declining inflation.
Bill Ackman also said that if the Federal Reserve manages to keep rates in the range of 5.5% while inflation is trending below 3%, this would be a very high real interest rate.
Pershing Square
Bloomberg News reports that 57-year-old Ackman founded Pershing Square in 2004. The company engages in shareholder activism and manages approximately $17 billion in assets. However, Bill Ackman has said he prefers to think of his team members as “engaged owners” who are involved in business instead of hard-charging activists.
The company has made several macro bets over the past 12 months. In the last month, Ackman created a buzz in the market by tweeting that his firm had managed to cover the short bet about US Treasuries.
No Soft-Landing, according to Ackman
Bill Ackman told Rubenstein that he is still unconvinced that the United States economy will be heading for a soft landing. In this scenario, the Federal Reserve has increased interest rates but has managed not to trigger a recession.
As Ackman noted, there is a real risk of a hard landing if the Federal Reserve does not begin to cut rates sooner. He is seeing signs of a weakening economy.
