The swiftness of the recent global market rebound has caught some of the biggest names on Wall Street wrongfooted, with some throwing in the towel, while others continue to doubt its sustainability.

Share Market Live

NSE

The S&P 500 has rebounded 43 percent from its March 23 low and is about 5 percent shy of its all-time high. This is despite economists not yet being able to assess with any certainty the full extent of the damage caused by the COVID-19 pandemic to the global economy.

The market rebound has “humbled” legendary investor Stanley Druckenmiller, who was fairly bearish on stocks as late as May after the market had turned. (Druckenmiller’s fund has risen a meagre 3 percent since March 23.)

In an interview with CNBC, Druckenmiller said that he had “long-term concerns” for the last few years that because of easy money, too much debt was being built up in the corporate sector. “When COVID hit, I was pretty much of the view that there was a good chance that the credit bubble had finally burst and the unwinding of that leverage would take years.”

But Druckenmiller said he “underestimated” the Fed, which has pledged a cumulative $2.3 trillion in support to banks, individuals and governments in response to the pandemic.

Druckenmiller, who executed George Soros’ famous bet against the Bank of England in 1992, said the excitement of reopening had also lifted stocks that were particularly hard hit.

He maintained that with the technical momentum the market had, stocks could continue to rise further.

But in a recent webcast, Jeffrey Gundlach, chief executive of DoubleLine Capital, said the stock market was on a “lofty perch” and will likely fall.

He added that he expects the dollar to weaken, thanks to the US’ burgeoning budget and trade deficits because of the coronavirus, and despite the fact a stock market fall could put upward pressure on the greenback.

The billionaire investor, also dubbed Wall Street’s “Bond King”, had on April 27 said that a retest of the March 23 low was “very plausible”, and added that he was maintaining a short position on the stock market.

“People don’t understand the magnitude of ... the social unease at least that’s going to happen when ... 26 million-plus people have lost their job,” he told CNBC then.

DoubleLine’s flagship Total Return Bond fund is in the bottom quartile when it comes to performance over the past three months.

The sustainability of the market’s rebound continues to have other notable skeptics, such as Mark Cuban, Paul Tudor Jones and David Tepper.

In an interview with Bloomberg, Howard Marks recently said that “those of us in the markets believe that stocks and bonds are selling at prices they wouldn’t sell at if the Fed were not the dominant force. So if the Fed were to recede, we would all take over as buyers, but I don’t think at these levels.”

First Published:Jun 10, 2020 7:52 PM IST