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Druckenmiller: Tariffs Could Kill Market’s ‘Animal Spirits’

Druckenmiller: Tariffs Could Kill Market’s ‘Animal Spirits’

Hedge fund billionaire Stanley Druckenmiller has been making headlines recently, speaking out on a number of topics, and Friday he told CNBC that while the Trump administration’s tariffs may not appear that damaging on paper, they could end up killing Wall Street’s “animal spirits.”

“If you’re a company and you’re thinking about building a plant or doing capital spending — I mean really? Aren’t you going to wait now?”

“Animal spirits is something you can’t measure, but confidence matters,” he said on CNBC’s “Squawk Box.” “And you do wonder whether this is enough to kill animal spirits.

“If you’re a company and you’re thinking about building a plant or doing capital spending — I mean really? Aren’t you going to wait now? See how this thing is resolved, what’s going on?”

The above tweets from Trump on May 5 caused Druckenmiller, who earned clients annualized returns of 30% during his career at Duquesne Capital, to empty his portfolio of all stocks. He then bought a bunch of Treasurys instead, fearing what the trade wars would bring to the markets.

“When the Trump tweet went out, I went from 93% invested to net flat and bought a bunch of Treasurys,” Druckenmiller said. “Not because I’m trying to make money, I just I don’t want to play in this environment.”

The tweets in fact did help send the markets spiraling downward. The Dow Jones Industrial fell more than 1,700 points in May, and the S&P 500 had its worst month since 2010, dipping 6.5%.

We’ve had a bit of a bounce-back so far in June, but Druckenmiller said he’s unsure where things are headed and he’s neither overly bullish nor bearish on stocks.

“If you calculate the tariffs, at least the one we’ve had just in and of themselves, it doesn’t look like it’s that damaging,” Druckenmiller said. “But at the same time, Ben Bernanke — who’s a great, great mind, got a lot of IQ points on me — he thought subprime was contained.

“If you just do the math, same thing: The tariff thing doesn’t look that damaging. But if you take all of the other effects in confidence — we’ve had a few more things down the road since then,” he said. “Huawei and 5G was going to be one of the great engines of not only U.S. but global growth. That’s challenged now. We’ve interrupted that supply chain. Supply chains all over the world have been sort of twisted around.”