The Hedge Fund -Milliarche David Tepper said the Federal Reserve could reduce interest rates a little more, but then it risks more inflation and other dangers for the economy and the markets if the central bank continues.
In other words, be careful what you want.
“If you go too much more to the interest rates, depending on what happens to the economy … it gets into the danger area,” said Tepper on Thursday in CNBCs “Squawk Box”. “You have to make sure not to make things too hot.”
His comments, after the central bank reduced the interest rates by a quarter on Wednesday, the first cut this year, while this year there are two further reductions. The chairman of Fed, Jerome Powell, characterized the cut more as “risk management” than something more that is aimed at supporting a weak economy. President Donald Trump put pressure on the boss to reduce the Fed Fund interest rate quickly and aggressively.
Topper feared that the Fed was not fully tamed during inflation during inflation, demand can increase faster than the supply and develop the price pressure again. In the meantime, too simple monetary policy could possibly create financial bubbles, since investors repeatedly flock into more risky corners of the markets.
“I believe that one or two loosening or even three saws do not matter, since we are still in a small restrictive area with a little too high inflation, even without the tariff-induced inflation. So you should be a bit restrictive,” said Tepper. “In addition, you really risk a lot of things, a weaker dollar, more inflation and things like that.”
“Don't fight against the Fed”
The founder and president of Appaloosa Management found that the ratings were high, but he would not yet bet against stocks while the Fed is still in relaxation mode.
“I don't love the multiple, but how do I not own?” Said Tepper. “I never fight against this Fed, especially if the markets tell me … one and three quarters more cuts before the end of the year, so that's a difficult thing not to own.”
According to Factset, the S&P 500 is almost the highest level since April 2021. NvidiaThe price-performance ratio is 30 times at Microsoft Business with almost 32 times further results.
“I am currently constructive because I loosened the relaxation, but I'm also miserable because of the levels,” he said. “Nothing is cheap.”
Tepper, also the owner of the NFL team The Carolina Panthers, announced that he exchanged his Nvidia position. At the end of June, Appaloosa held the chip share worth around $ 277 million and had it as a seventh bet of the fund.
“I have Nvidia, but I'm going a bit back and forth … trade a little,” said Tepper. “We always had a Nvidia position, but not the same size.”
Click here to see the full interview.