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“‘Taking the optionality of 75 basis points off the table was an unforced error the Fed didn’t have to do. The Bank of England making a similar mistake the next day caused the market to become a bit unhinged.’”
That’s David Tepper, the founder of Appaloosa Management, in remarks to CNBC, putting the blame for this week’s wild ride for financial markets on the shoulders of Federal Reserve Chairman Jerome Powell and the Bank of England.
“Central banks have a little bit of a credibility problem,” Tepper said, according to the network.
Tepper, who is also owner of the Carolina Panthers football team, is considered one of the most successful hedge-fund managers of all time. His remarks often move markets.
Archives: The rise of David Tepper
The Fed on Wednesday, as expected, raised the fed funds rate by 50 basis points, or half a percentage point, its first hike of that size since 2000. Powell, in a news conference, said half-point hikes were on the table for the next couple meetings, but said an even larger 75-basis-point hike wasn’t being “actively considered.”
That sent stocks soaring into the close on Wednesday, with the Dow Jones Industrial Average
DJIA,
finishing with a gain of more than 900 points, or 2.8%, while the S&P 500
SPX,
jumped 3% — their biggest one-day percentage gains since 2020. The Nasdaq Composite
COMP,
soared 3.2%.
On Thursday, stocks gave it all back and then some, with the Dow slumping over 1,000 points, or 3.1% and the Nasdaq down 5% for their biggest falls since 2020, while the S&P 500 shed 3.6%. Stocks ended lower Friday.
Tepper argued that inflation-wary market participants were ultimately left unsettled by Powell removing the option of a larger rate hike, while the Bank of England on Thursday made a similar mistake. The BOE delivered its fourth rate increase of its current hiking cycle but indicated it was likely to move cautiously in the future due to the threat of falling into recession.
Also read: Dollar soars as Bank of England’s grim forecast gives investors reason to sell off Treasurys, stocks
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