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In keeping with Stanley Druckermiller, the inventory market is in "an absolute insanity".

The stock market is in a mania fueled by the Federal Reserve and investor speculation and will end badly for years to come, longtime hedge fund manager Stanley Printmiller said Wednesday.

"Everyone loves a party … but after a big party there is inevitably a hangover," Druckermiller, CEO of the Duquesne Family Office, told CNBC's "Squawk Box". "Right now we're in utter madness. We have commentators encouraging companies to do stock splits. Companies then go up 50%, 30%, 40% on stock splits. That brings no value, but stocks go up."

Tesla stock rose 82.5% between August 11 – when the company announced a 5-for-1 stock split – and August 31, when the split took effect. Apple was up 34.2% between July 30 and August 31, after a 4-for-1 stock split became known. The stock has fallen more than 12% since the split went into effect.

The S&P 500 gained more than 51% after hitting an intraday low on March 23. The broader market index hit an all-time high last week before a rollover in tech stocks brought it back below that level. This massive market rally is in large part due to the actions the Fed has taken since the pandemic began, Druckermiller said.

He noted that while the central bank did "a great job" in March of cutting rates and launching unprecedented stimulus programs to keep the economy going, the market rally that followed was "excessive". Printmiller also said that the Fed's new inflation framework, which essentially allows the inflation rate to stay above 2% for an extended period of time before interest rates hike, is a huge risk the central bank takes to stimulate the economy.

"For the first time in a long time, I'm worried about inflation," said Druckermiller. "We actually have the Federal Reserve Chairman with a $ 3.5 trillion deficit lobbying Congress to get more spending and guarantee those on Wall Street that he'll subscribe."

"I think it's dangerous. We could easily see inflation of 5% to 10% in the next four or five years," he said.

Druckmiller, known for investing based on large macroeconomic claims, added that he did not know where the market would go in the near future. However, he noted that the next three to five years will be "very challenging" for the market.

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