Hedge Fund Bigwig: U.S. Stocks are in extreme frenzy When the feast finally ends

Billionaire Stanley Druckenmiller, a legendary Wall Street hedge fund manager, said Wednesday that U.S. stocks are in the midst of an extreme frenzy fueled by the Fed's unlimited stimulus and investor speculation, which will lead to bad results in the coming years.

He said: "Everyone loves banquets... But inevitably, a feast will be followed by a hangover. Right now, we're in the midst of an extreme frenzy. We have commentators who encourage companies to split their shares. Then, the company's stock price rose by 50%, 30%, 40%. It didn't bring any value, but the stock price went up. ”

After Tesla announced its share split on August 11, its stock price rose by 82.5% by the time the share split took effect on August 31. Apple's stock price rose 34.2 percent from July 30 to August 31 after it announced its split, but has fallen more than 12 percent since then.

After falling to an all-time low on March 23, the S&P 500 has risen more than 51 percent, hitting an all-time high before last week's plunge in tech stocks.

Druckenmiller said: "I don't know where the market is going in the near future. I don't know if it's going to go up 10% or go down 10%. But I would say that the next three to five years will be very, very challenging. ”

He said this massive market rally was largely due to the measures the Fed has taken since the pandemic began. He noted that while it was a "great job" for the Fed to prop up the economy in March by cutting interest rates and launching an unprecedented stimulus package, the market rally that followed "has gone too far."

"In fact, the merger of monetary and fiscal stimulus during the pandemic has set a precedent not seen since the Fed gained its independence status." This has clearly created a massive frenzy in financial assets. ”