A billionaire investor who predicted the '08 crisis and the post-COVID inflation spike sees 'significant' recession risk and a prolonged period of low asset returns

Paul Singer, Elliott Management

REUTERS/Steve Marcus

• Paul Singer sounded recession alarms and warned of a lengthy period of low returns. 
• The hedge fund manager said the US economy is facing an "extraordinarily dangerous and confusing period," per the WSJ.
• Singer previously called the subprime mortgage crisis and warned of the post-Covid inflation spike.

Billionaire hedge fund proprietor Paul Singer warned investors of a prolonged market cycle of low returns in financial assets as recession risks continue to mount. 

In an interview with the Wall Street Journal's editorial page, the founder of Elliott Management and one of the world's most notable money managers said the US economy is facing an "extraordinarily dangerous and confusing period."

Financial markets are facing a slew of obstacles on top of an already difficult macro environment as the Federal Reserve and other central banks continue to hike interest rates to battle stubbornly high inflation.

"Valuations are still very high. There's a significant chance of recession," Singer said. "We see the possibility of a lengthy period of low returns in financial assets, low returns in real estate, corporate profits, unemployment rates higher than exist now and lots of inflation in the next round."

And if the next recession hits, central bankers will ease monetary policy again, thinking that inflation has been conquered, he added. But inflation will come back, possibly even more than before, meaning rates will have to go higher for longer, he said. 

Singer was one of the first to call the subprime mortgage crisis in 2008, and warned of high inflation at the start of the Covid-19 pandemic. 

In an April 2020 letter to investors, Singer said: "We think it is very unlikely that central bankers will move to normalize monetary policy after the current emergency is over... The world has moved demonstrably closer to a tipping point after which money printing, prices and the growth of debt are in an upward spiral that the monetary authorities realize cannot be broken except at the cost of a deep recession and credit collapse."

This story was originally published on April 10, 2023.

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