Greenlight’s David Einhorn sees ‘higher secular inflation’ in the years ahead

Greenlight Capital’s David Einhorn believes the outcome of the U.S. presidential election is insignificant to the markets, as he sees elevated inflation on the back of a burdening fiscal deficit under both candidates. “From a market perspective, we don’t think it matters very much who wins,” Einhorn wrote in a letter to investors dated Tuesday. “The economic policies of both parties are remarkably similar. Both favor large deficits despite a strong economy. We believe this supports our ongoing expectations of higher secular inflation in the coming years.” Vice President Kamala Harris has entered the race following President Joe Biden’s exit, going head to head with former President Donald Trump in the November election. The federal debt is now at $34.5 trillion , or about $11 trillion higher than where it stood in March 2020. As a portion of the total U.S. economy, it is now more than 120%. Debt has soared under Biden after Trump’s aggressive spending response to the pandemic increased the levels. The consumer price index, a broad measure of costs for goods and services, declined 0.1% in June from May, putting the 12-month rate at 3%, around its lowest level in more than three years. However, a recent disappointing reading of the labor market has reignited fears of a “hard landing,” causing the markets to crater and volatility to soar. Greenlight’s hedge fund returned 2.8% in the second quarter, net of fees, compared to the S & P 500’s 4.3% gain. The performance was dragged down by holdings including Alight, Bright House Financial and ODP Corporation. Einhorn said leaders in the fund included gold, HP, Kyndryl Holdings and Consol Energy. — CNBC’s Michael Bloom contributed reporting.