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Bill Ackman: Stock market waiting for rate hikes to stop for buy signal

Billionaire hedge fund manager Bill Ackman said Tuesday that investors are waiting for the Federal Reserve to halt its rate hikes before they aggressively move back into the stock market.

“I think once people realize the Fed doesn’t have to keep increasing rates and will soon be taking rates down, that’s kind of a buy signal for markets,” the founder and CEO of Pershing Square Capital Management told CNBC.

Ackman argued that investors will likely anticipate this when they see a “powerful continuing trend” of moderating inflation. For his part, the fund manager predicted that the Fed still needs to raise rates and likely hold them at elevated levels for around a year to tamp down inflation.

“What they’ve said they are going to do they have to do, which is to raise rates to something in the order of 4% or maybe a little bit more … keep them there for a reasonably extended period of time, maybe a year or so,” he said.

Looking out a year or so, Ackman predicted that inflation would be at around 3.5%-4.0%, with a downward trend.

In terms of his investments, Ackman reported that Pershing Square mostly holds the same investments it had at the beginning of the year, not counting a “short-dated” dalliance with Netflix (NASDAQ:NFLX) that the fund has already sold.

In a regulatory filing made in August, Pershing Square disclosed that it had exited NFLX and reduced its positions in Chipotle Mexican Grill (CMG), Hilton Worldwide (HLT), Domino’s Pizza (DPZ) and Restaurant Brands International (QSR).

Meanwhile, the company maintained its positions in Howard Hughes (HHC), Lowe’s Companies (LOW) and Canadian Pacific Railway (CP).

For more advice on the current market, see the stocks that made Bank of America’s screens for secure dividends.