Druckenmiller: Liquidating NVIDIA is a major mistake, the Fed's aggressive rate cut in September was a mistake, the market has already priced in Trump's victory

On Wednesday, Stanley Druckenmiller, a billionaire investor and Chairman/CEO of Duquesne Family Office, who is a former colleague of Soros, expressed regret over liquidating NVIDIA, market pricing Trump's victory in the US presidential election, the Fed's 50 basis point rate cut in September being a mistake, shorting US bonds to guard against rising inflation, etc., in a dialogue with the media.

Liquidating NVIDIA was a major mistake

Druckenmiller stated that liquidating NVIDIA was a "major mistake" for him. If the NVIDIA stock price falls, he will buy the stock again. "I am licking the wound from that terrible sale."

Druckenmiller said that he does not currently hold NVIDIA stock. He sold it in the range of approximately $800-950, and the stock is now around $1300 (as of Wednesday's close at $135.72 per share after NVIDIA's 1-for-10 stock split in June this year). After selling, he missed out on the subsequent $400 increase.

Druckenmiller mentioned that he has long believed in artificial intelligence (AI), but the reason he sold NVIDIA at that time was that the stock price tripled in a year:

18 months ago, I fully expected to hold NVIDIA for several years, but at that time, the price was around $300. However, it tripled within a year. Although NVIDIA was a major beneficiary of the AI boom, I decided to take profits at that time due to the significant price increase. Druckenmiller sold out of caution for valuation, "I am not Buffett, I adjust my positions based on market dynamics."

Despite reducing his position, Druckenmiller remains interested in AI and its infrastructure, stating, "We are long-term faithful believers in artificial intelligence."

After Druckenmiller's statement, NVIDIA rose, with intraday gains expanding to 3.8%.

Market has priced in Trump's victory

Druckenmiller mentioned that the market has already priced in Trump's victory in the upcoming US presidential election next month. "In the past 12 days, the market seems very convinced that Trump will win. You can see this from bank stocks, from cryptocurrencies, and even from Trump media tech DJT."

However, Druckenmiller stated that he will neither vote for Harris nor Trump. He has not donated to either of the two presidential candidates. He had previously supported Nikki Haley, who competed with Trump for the Republican presidential nomination during the primaries. Regarding the current two presidential candidates, Druckenmiller's views are as follows:

Druckenmiller called Trump a braggart. He does not support Trump's tariff stance at all. He also expects that if Trump returns to the White House, the Fed is likely to become more hawkish. Regarding the recent rumors of the Trump team planning to establish a shadow Fed, Druckenmiller described it as a "frightening idea."

Wall Street News Note: It is worth mentioning that Scott Bessent proposed the idea of ​​establishing a shadow chairman of the Federal Reserve. Bessent has been providing economic advice to the Trump campaign team. Bessent himself has also worked at Soros Fund Management.

Druckenmiller stated that if Harris is elected president, it would be unfavorable for businesses. He predicted that even if Harris wins the presidential election, it is highly unlikely that the Democratic Party would control Congress.

Regarding the impact of the US election on US stocks, Druckenmiller expects that if there is a so-called "blue sweep," that is, the Democrats have a comprehensive advantage, US stocks may fall into trouble in three to six months. The probability of a "red sweep," that is, the Republicans have a comprehensive advantage, is higher than Trump being re-elected as president and the US Congress being dominated by the Democratic Party.

The 50 basis point rate cut by the Federal Reserve in September was a mistake

Druckenmiller believes that the 50 basis point rate cut by the Federal Reserve in September was a mistake, and he compared it to the policy mistakes of the Federal Reserve in 2021:

Druckenmiller pointed out that the Federal Reserve was trapped by forward guidance in 2021 and warned that the same problem might occur again.

Looking back, he explained that the inflation rate had exceeded the target for 13 months at that time, yet the Federal Reserve kept interest rates at zero and aggressively bought bonds.

He emphasized that the Federal Reserve's inability to respond quickly enough to inflation pressure was a major mistake, and he hopes they will not make the same mistake now.

When discussing the broader macroeconomic environment, Druckenmiller emphasized that the Federal Reserve believes that monetary policy is restrictive, which is disconnected from actual market conditions. He questioned the Federal Reserve's claim, believing that the financial environment does not reflect the restrictiveness that the Federal Reserve claims:

I am a market animal. Frankly, over the years we have found that the market is better at predicting than professors.

Despite the Federal Reserve's claim that monetary policy is restrictive, the market tells a different story: the stock market hits historic highs, gold hits historic highs, GDP is above trend levels, credit is tight, bank profits and forecasts look good.

Druckenmiller believes that the market needs to lower its expectations for the speed and extent of Federal Reserve easing.

Druckenmiller revealed that when the Federal Reserve decided to cut rates by 50 basis points at the FOMC monetary policy meeting on September 17-18, they shorted bonds. He believes that there are still risks in the bond market. Druckenmiller remains cautious about the long-term impact of fiscal and monetary policy, saying that if inflation rises again, it could have a serious impact on market stability. Therefore, he hedges his positions by betting on the bond market rather than the stock market.