Billionaire investor Stanley Druckenmiller warns there are “more shoes to fill” and says Silicon Valley Bank is “probably the tip of the iceberg.”

Stanley Druckenmiller fears a recession is imminent after more than a year of aggressive Federal Reserve rate hikes failing to stem inflation. The famed hedge fund, which now operates the Duquesne Family Office, said on Wednesday that despite the economy's recent resilience – fueled by a low unemployment rate and positive first-quarter GDP growth – it believed a “hard landing” was inevitable.

“Our central case is that there is more to do besides the asset markets, above all economically,” he says said Bloomberg Wednesday.

For years, Druckenmiller has criticized Fed officials for bursting an asset bubble in stocks, real estate and other sectors with their easy-money policies after the global financial crisis. And even after the Fed changed stance and started raising rates in 2022, making for a dismal year for markets, he believes there's more downside ahead — the bubble burst wasn't the reason.

The veteran investor argued that high interest rates could lead to further problems in key sectors of the economy, as happened with regional banks in March when the Silicon Valley bank quickly collapsed and regulators were forced to step in and protect depositors. He referred to the ailing commercial real estate market and in particular to the office sector – the wealth As previously reported, the company is currently in the midst of a crisis — an area that could run into trouble. However, he also warned that a “credit crunch” was looming as banks' capital dried up and they would take less risk as economic growth slowed.

“When you get out of that kind of environment, the biggest asset bubble of all time, and then hike rates 500 basis points in a year, there's a lot behind it. I think there's a good chance Silicon Valley Bank, Bed Bath & Beyond are probably just the tip of the iceberg,” he said.

Druckenmiller has been warning of a possible US recession in 2023 for over a year. The billionaire, who is known as a wealth manager to have never had a bad year, said last September that he “would be stunned if we didn't have one in 23 recession.”

“I don't know when, but definitely by late 23. It wouldn't surprise me if she's not taller than the so-called average garden variety,” he told investors at CNBC's Delivering Alpha Investor Summit.

Later that month, Druckenmiller warned that higher interest rates could slow economic growth, leading to a “high probability” that the stock market would remain flat for a decade. And this May he repeated his dire warnings, arguing that the economy is on the verge of a hard landing and if it crashes, bankruptcies will rise, unemployment will soar to over 5% and corporate profits will fall by at least 20%.

Billionaire investor Jeffrey Gundlach, founder of investment firm DoubleLine Capital known as the “Bond King,” also fears the economy is on shaky ground right now. Gundlach told DoublineCapital investors in a webcast on Tuesday that economic indicators were “absolutely recessionary,” CNBC reported.

He pointed to the Conference Board's Leading Economic Index (LEI), which fell 0.6% in April and 4.4% between October 2022 and April 2023. The LEI is designed to help predict turning points in business cycles and includes components such as building permits and unemployment claims, and the ISM New Orders Index, which tracks orders from firms in the manufacturing sector. Justyna Zabinska-La Monica of the Conference Board, senior manager of Business Cycle Indicators, said in a statement that the LEI “continues to warn of an economic downturn this year.”

“It's pretty clear that we feel like we're about to end a recession,” Gundlach said of the data.

Still, there is an elephant in the room – AI

The euphoria over the technology has gripped investors in recent months, leading to a surge in AI-related stocks and ETFs. And Druckenmiller, who is valued at nearly $10 billion according to Bloomberg's Billionaires Index, said on Wednesday he sees opportunities in the tech even if valuations are stretched.

“They haven't separated the wheat from the chaff yet, but I believe, unlike crypto, that AI is real and could be as transformative as the internet,” he said.

This story was originally published on Fortune.com

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