Druckenmiller Sold Gold on Election Night in Bet on Growthby
Optimistic on Trump, says divisiveness may have reached peak
He’s also shorting bonds on prospect of higher growth, rates
Stan Druckenmiller says he sold all his gold on election night and is short bonds globally in a bet on stronger economic growth and rising interest rates.
“All the reasons I owned it for the last couple of years seem to be ending,” he said of gold in an interview on CNBC Thursday. In May, the billionaire said the precious metal was his largest currency allocation and that the bull market in stocks had exhausted itself. The rally in gold, which has jumped about 10 percent over the last two years, is losing steam since Tuesday’s Presidential election. Investor attention is now turning back to the Federal Reserve, with traders boosting bets on an interest-rate increase next month.
Druckenmiller, who didn’t support either candidate in Tuesday’s Presidential election, said he’s optimistic that the Trump administration will bring deregulation and “serious” tax reform, spurring growth. Those benefits should outweigh concerns about more protectionist trade policies, he said.
“It’s been very frustrating to watch monetary radicalism the last four years be the only thing addressing our issues, and anytime I’ve talked anywhere, I’ve said ‘Can we just try deregulation and tax reform? Can we just try it?’” he said. “This economy is so over-regulated and people are just drowning in red tape.”
Druckenmiller, who averaged annual returns of 30 percent from 1986 through 2010 at his Duquesne Capital Management, said that while the budget deficit will be higher, his bond holdings reflect his view of stronger economic growth. He’s short U.S., U.K., German and Italian bonds, and favors “sectors of the equity market that respond to growth” as well as the dollar, particularly against the euro.
In terms of the economic team President-Elect Donald Trump is assembling, Druckenmiller said he hopes that the administration will forge a path with House Speaker Paul Ryan.
“Frankly I am just hoping that economic policy is deferred to Mike Pence and Paul Ryan in terms of civic details and policy,” he said.
He also said that if the new president can address income inequality with policies then “maybe we’re looking at the peak of divisiveness, not an accelerating trend.”