Now’s not the time to be short the market.
That’s according to billionaire investor Stanley Druckenmiller, who says positive news on the coronavirus front has jolted the market into a big rotation out of growth and into value stocks.
“It’s nuanced, but there are a lot of companies that will be direct beneficiaries [from a coronavirus vaccine], and they probably have further to go,” Druckenmiller said. “I certainly wouldn’t want to be short the market.”
The Duquesne Family Office CEO’s comments came just as Pfizer (NYSE: PFE) and BioNTech (NASDAQ: BNTX) reported that preliminary data showed their experimental coronavirus vaccine showed 90% effectiveness in preventing COVID-19 in a large human study.
The results pave the way for the two companies to seek an emergency-use authorization from regulators should further research also prove that the vaccine is safe.
“I think we can see light at the end of the tunnel,” said Pfizer CEO Dr. Albert Bourla. “I believe this is likely the most significant medical advance in the last 100 years, if you count the impact this will have in public health, global economy. …It is a great day for science. It is a great day for humanity when you realize your vaccine has 90% effectiveness. That’s overwhelming.”
The news sent much of the market soaring early this week, with airlines and movie theater stocks seeing big gains. Meanwhile, stay-at-home stocks fell, with names like Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX), Peloton (NASDAQ: PTON), and Zoom Video (NASDAQ: ZM) all slipping lower.
“You’ve had a bunch of equities benefitting greatly from work from home,” Druckenmiller said. “A lot of money has rotated into them. They are overvalued.”
“But then you’ve got a whole other sector of the market that has struggled mightily because of COVID,” he continued. “They’re selling at under-value relative to, say, a three-to-five-year outlook. So the rotation into that would seem entirely rational.”
Druckenmiller believes inflation will rise over the next 5 to 6 years given the Federal Reserve’s massive stimulus measures. The investing legend said he likes gold and bitcoin as hedges against potential inflationary pressures, and said this would also benefit miners like BHP Billiton (NYSE: BHP), Freeport-McMoRan (NYSE: FCX), and Rio Tinto (NYSE: RIO).
“Frankly, if the gold bet works the bitcoin bet will probably work better because it’s thinner, more illiquid and has a lot more beta to it,” Druckenmiller said.
Raoul Pal, a former Goldman Sachs hedge fund chief, said Druckenmiller’s endorsement of bitcoin can’t be overstated. “That has removed every obstacle for any hedge fund or endowment to invest” in bitcoin, Pal said.