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EconomyPaul Tudor Jones says inflation could be worse than feared, biggest threat to...

Paul Tudor Jones says inflation could be worse than feared, biggest threat to markets and society

Billionaire hedge fund supervisor Paul Tudor Jones believes inflation is right here to keep, posing a significant threat to the U.S. markets and financial system.

“I think to me the No. 1 issue facing Main Street investors is inflation, and it’s pretty clear to me that inflation is not transitory,” Jones stated Wednesday on CNBC’s “Squawk Box.” “It’s probably the single biggest threat to certainly financial markets and I think to society just in general.”

Jones stated the trillions of {dollars} in fiscal and financial stimulus is the impetus for inflation to run hotter for longer. To rescue the financial system from the Covid-19 pandemic, the Federal Reserve has added extra than $4 trillion to its stability sheet by way of its open-ended quantitative easing program, whereas the U.S. authorities has unleashed over $5 trillion in fiscal stimulus.

“Inflation can be much worse than what we fear. We have the demand side of the equation … and that is $3.5 trillion greater than what it normally would have … just sitting in liquid deposits,” Jones stated. “They can go into stocks, or crypto, or real state, or be consumed, so that’s a huge amount of dry powder just sitting waiting to be utilized at some point, which is why inflation is not going away.”

The longtime dealer stated worth pressures will proceed to rise within the coming months. Inflation ran at a contemporary 30-year excessive in September amid provide chain disruptions and terribly robust demand.

The core private consumption expenditures worth index, which is the Fed’s most popular measure of inflation, elevated 0.3% in August and was up 3.6% from a 12 months in the past.

“It’s absolutely dead for a 60/40 portfolio, for a long stock, long bond portfolio. So the real question is how you defend yourselves against it,” Jones stated.

The founder and chief funding officer of Tudor Investment Corp. stated that it is time to double down on inflation hedges together with commodities and Treasury inflation-protected securities, and that buyers ought to keep away from fastened revenue on this inflationary and low-rate setting.

“You don’t want to own fixed income,” Jones stated. “You do not want to hold that whatsoever because what they’re saying, what they’re telling you by their actions, is that they’re going to be slow and late to fight inflation and somewhere down the road, somebody will have to come in … and put the hammer down.”

Still, the legendary investor did not sound too dire about shares, saying they could be a good guess amid persistent inflation. Jones stated if the Fed strikes to deal with inflation, it could compress fairness multiples.

“Equities are interesting. Certainly in an inflationary world, they are a much better bet than fixed income,” Jones stated.

The S&P 500 is up about 20% in 2021, sitting much less than 1% from its all-time excessive reached in early September.

Jones shot to fame after he predicted and profited from the 1987 inventory market crash. He can be the chairman of nonprofit Just Capital, which ranks public U.S. corporations primarily based on social and environmental metrics.

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