Stanley Druckenmiller Says Economy On Brink Of Recession: 'Naive Not To Be Open-Minded To Something...Really Bad Happening'

Stanley Druckenmiller, prominent hedge fund investor and billionaire founder of Duquesne Family Office, thinks the U.S. economy is on the brink of a recession and also predicts there will be a hard landing, according to a report.

What Happened: Druckenmiller cited a variety of factors including a fall in retail sales and the turmoil in regional banks that prompted him to accelerate his forecast for a recession, reported Bloomberg.

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"I am not predicting something worse than 2008," Druckenmiller said. However, to be a good risk manager, "it's just naive not to be open-minded to something really, really bad happening," he added.

The investor defined a hard landing as unemployment exceeding 5%, corporate profits declining at least 20% and rising bankruptcies.

Druckenmiller’s comments come at a time when Wall Street is treading carefully in the wake of a barrage of developments that include the debt ceiling crisis, inflation data release and the Federal Reserve's future policy path. The SPDR S&P 500 ETF Trust SPY closed 0.44% lower on Tuesday while the Invesco QQQ Trust Series 1 QQQ lost 0.63%.

Later in the day, reports emerged about President Joe Biden and Republicans failing to reach any consensus regarding raising the debt limit but agreeing to hold another meeting on Friday.

Druckenmiller believes it's a challenging time to make economic forecasts and that he sees no "fat pitches" when it comes to offering investment ideas.

"You're going to have unbelievable opportunities in the next couple of years," he said. "There's a lot of dispersion within industries, and just make sure to preserve your capital until they present themselves."

Positions: The billionaire investor said Treasuries are off the table given where they are trading in relation to the Fed funds rate. He is short the dollar and also owns gold and silver, according to the report.

Druckenmiller believes copper, the housing industry, biotech firms and companies focusing on artificial intelligence, or AI, could be big beneficiaries as the economy emerges from recession.

He believes artificial intelligence could lead to $100 billion companies. "AI is very, very real and could be every bit as impactful as the internet," said the investor, who owns stocks like NVIDIA Corporation NVDA and Microsoft Corp MSFT.

On Fed: Policymakers have left themselves less wiggle room as against previous economic cycles, said Druckenmiller, who has been a long-time critic of the Federal Reserve's easy monetary and fiscal policy, especially in the past few years. "We basically wasted all our bullets," he said, according to the report.

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