Stanley Druckenmiller: watch out for the Covid stock rotation

A lot of money has “rotated” into stocks that benefit from working at home. As we return to normal, it will flow back out, says Stanley Druckenmiller, chief executive of the Duquesne Family Office.

The prospect of one or more vaccines for Covid-19 has sent markets soaring. But certain stocks are set to do a lot better than others, as billionaire investor Stanley Druckenmiller points out. 

“You’ve had a bunch of equities benefiting greatly from work from home. A lot of money has rotated into them. They are overvalued,” the hedge fund manager tells CNBC. “But then you’ve got a whole other sector of the market that has struggled mightily because of Covid-19. They’re selling at under-value relative to... a three-to-five-year outlook. So the rotation into that would seem entirely rational.”

Another legacy of the coronavirus pandemic will be less welcome to many investors. Druckenmiller reckons that inflation is likely to rise in the coming years, due primarily to the actions taken by central banks, and the US Federal Reserve in particular, in their efforts to protect the global financial system and offset the worst of the shutdown-related economic damage. 

Druckenmiller holds both gold and the cryptocurrency bitcoin as hedges against inflation. While he owns a lot more gold than he does bitcoin, he expects the latter to “work better”, notes Billy Bambrough on Forbes. “Bitcoin could be an asset class that has a lot of attraction as a store of value to both millennials and the new West Coast money and, as you know, they got a lot of it.” Druckenmiller adds that the digital currency is becoming more mainstream. “It’s been around for 13 years and with each passing day it picks up more of its stabilisation as a brand.”

Recommended

How the UK can help solve the semiconductor shortage
UK Economy

How the UK can help solve the semiconductor shortage

The EU’s plan to build a semiconductor manufacturing industry will fail, but the UK should take advantage of that, says Matthew Lynn
26 Sep 2021
The charts that matter: China upsets cryptocurrency markets
Global Economy

The charts that matter: China upsets cryptocurrency markets

Bitcoin slid again this week after China declared all cryptocurrency transactions illegal. Here’s what’s happened to the charts that matter most to th…
25 Sep 2021
How to cut your energy bill this winter
Personal finance

How to cut your energy bill this winter

Gas and electricity prices have risen by more than 250% so far this year. And they’re likely to go higher still Saloni Sardana looks at what can you …
24 Sep 2021
Cryptocurrency roundup: China’s crackdown intensifies
Bitcoin & crypto

Cryptocurrency roundup: China’s crackdown intensifies

Most major cryptocurrencies suffered falls this week as China cracked down even harder, while the Evergrande crisis rattled global markets, including …
24 Sep 2021

Most Popular

Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
A nightmare 1970s scenario for investors is edging closer
Investment strategy

A nightmare 1970s scenario for investors is edging closer

Inflation need not be a worry unless it is driven by labour market shortages. Unfortunately, writes macroeconomist Philip Pilkington, that’s exactly w…
17 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021