Kyle Bass Surprised by Magnitude of Market Recovery in Current Economy

Kyle Bass (Trades, Portfolio), founder and chief investment officer of Dallas-based hedge fund Hayman Capital Management, said in an interview on Tuesday that he didn’t anticipate the stock market’s quick recovery following its coronavirus-driven decline in March.

“I’m surprised at the size of the bounce when you look at our economy and the fact that we [may] have … 20{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} unemployment, and in the center of the fairway of where we think it will be by the end of the year, in a perfect world, maybe we’ll be back to 7{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} to 10{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} unemployment,” he told CNBC’s “Squawk Box.”

Since its March 23 low of 2,191, the S&P 500 has recovered more than 30{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644}, but also sits around 15{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} off its all-time high of 3,393 that was reached on Feb. 19.

As the Covid-19 virus has wreaked havoc on society as well as the economy, Bass said he believes the “economic and financial realities” of extended stay-at-home orders and the closure of nonessential businesses, which led to massive unemployment numbers, will be larger than what has been reflected in the stock market.

“We’re going to have a very long grind here, trying to get these people back to work,” he added.

As for the driving force behind the market’s recovery, Bass noted aggressive action from the Federal Reserve in response to the crisis has likely played a role.

“The Fed has come in and done everything that it possibly could and then some,” he said. “The Fed’s buying everything but equities.”

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About the author:

Sydnee Gatewood

I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg