David Einhorn, the founder of Greenlight Capital, stated on Wednesday that he remains pessimistic about the stock market due to the potential rise in inflation and interest rates. In an interview with CNBC’s “Halftime Report,” Einhorn said, “I think we should be bearish on stocks and bullish on inflation. I think we’re in a policy now, which is probably pretty good for Main Street, but it’s going to be difficult and increasingly difficult for financial assets.” 

He further added that the Federal Reserve may have to take additional measures to combat persistent price pressures, resulting in interest rates rising higher than the consensus expectations. As the central bank has already raised interest rates to a target range of 4.5%-4.75%, the highest since October 2007, Einhorn thinks that both long- and short-term rates are likely to increase and could even exceed what people are anticipating.

Over the past year, Treasury yields have risen due to multiple rate hikes, and on Wednesday, the benchmark 10-year Treasury yield reached 4% for the first time since November. Short-term rates, such as 6-month and 1-year yields, also surged, reaching over 5% for the first time since 2007. This surge in yields is inversely related to bond prices.

David Einhorn believes that the Federal Reserve wants stock prices to be lower and thinks they should care less about the stock market in either direction. Despite this, Einhorn had a successful 2022, with a 36.6% return due in part to his short position in innovative tech stocks. He mentioned in a recent investor letter that 2022 was his best year ever, and it was most comparable to 2001, the year following the last tech bubble burst. Additionally, he disclosed that he still has short positions on some “bubble” stocks.

David Einhorn, a well-known investor, stated that his hedge fund holds a net long position, but it is relatively small. He is confident in the value picks he has made in his portfolio. Einhorn said that while he is conservative about the overall direction of the market, he is excited about some of the positions in his long portfolio because they are undervalued and generating significant returns. 

As of the end of 2022, Greenlight’s top long positions were Green Brick Partners, Brighthouse Financial, and Consol Energy. Einhorn previously noted that his hedge fund’s significant winners in 2022 included Atlas Air Worldwide, Consol Energy, Teck Resources, and Twitter (a merger arbitrage play).