Top investor Kyle Bass warns the Fed could drag the stock market down this year – and predicts oil prices will rise this summer

Kyle Bass.
  • Kyle Bass has warned that the Federal Reserve’s inflation fight could send the stock market down 25%.
  • The Hayman Capital boss predicted a spike in oil prices as the global economy reopens this summer.
  • Bass warned against buying Chinese stocks, citing fraud and regulatory risks.

Veteran investor Kyle Bass has warned stocks could crash this year, predicted a spike in oil prices within months and called buyers of Chinese stocks irresponsible, in a CNBC Interview this week.

Federal Reserve officials, under pressure to curb galloping inflation, are expected to raise interest rates and reduce central bank bond holdings in the coming months.

“There’s no way the stock market will go up this year, and it will probably go down quite aggressively, if they stick with this plan,” Bass said.

The Hayman Capital Management boss added that an increase in short-term interest rates of just 100 or 125 basis points could trigger a 25% drop in the stock market. This magnitude of the decline would likely spook the Fed and lead it to abandon plans for further tightening, he said.

Bass predicted that West Texas Intermediate, the benchmark price for U.S. oil, would drop from $83 a barrel to $100 in the first half of this year. He suggested that the reopening of the global economy would revive energy demand and that the recent shift in capital spending from hydrocarbons to clean energy would lead to supply constraints.

“Fasten your seatbelts,” he said, adding that he doesn’t expect demand for hydrocarbons to fall in the next 20 years because a global transition to renewable energy will take 40 or 50 year.

Finally, Bass cautioned against betting on the rally in Chinese equities this year. “People betting on a rebound, it’s a fool’s game,” he said.

The hedge fund manager pointed to the risk of accounting fraud due to a lack of financial audits in China, and the prospect of new regulatory repressions on Chinese companies.

“People who invest in Chinese stocks are breaching their fiduciary duties to their investors,” he said.

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Felix J. Dixon