Hedge fund manager Paul Tudor Jones, who predicted the October 1987 crash, believes the stockmarket will rally later this year, even in the face of tightening monetary policy. "I think we'll see rates move significantly higher beginning some time late third quarter, early fourth quarter," Jones told CNBC, but "the stockmarket also has the ability to go a lot higher at the end of the year... I can see things getting crazy, particularly at year-end after the mid-term elections... to the upside." The move higher, however, will not be sustainable eventually, rising inflation and interest rates will lead to a recession.
Moreover, the state of America's balance sheet means that President Donald Trump's stimulative fiscal policy isn't sustainable either, Jones said during a conversation with Goldman Sachs CEO Lloyd Blankfein, notes Yahoo Finance. "We're going to have to mean revert to a normal real rate of interest with a normal term premium that's existed for 250 years... That probably means the price of assets goes down in the very long run." The danger is that, come the next recession, there will be little left in the pot to enable the government or central banks to offset the downturn. "We'll have monetary policy, which will exhaust really quickly, but we don't have any fiscal stabilisers."
That's all further down the line. For now, though, Jones doesn't have significant exposure to the financial markets, mainly because he sees a quiet period ahead. "We're getting ready to go into a summer lull... I like to have significant leveraged positions when I think there is an imminent price move directly ahead."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Trouble brews in B&M as bargain shops take a hitOpinion Once a stock market darling, B&M's share price has slumped. What has gone wrong for bargain shops?
-
US and China reach a ceasefire in their trade war after talks in LondonThe US and China's trading relationship – the most important one in the global economy – is back on track. Will the truce last?
-
Robert Rubin: The 'Teflon Don' of Wall StreetProfiles Robert Rubin was widely feted for America's impressive economic expansion during the Clinton years. But did the former US Treasury Secretary sow the seeds of the financial crisis?
-
Lex Van Dam: From reality TV to investment training
Features Lex Van Dam, a former Goldman Sachs trader turned hedge-fund manager turned reality TV impresario, has just launched his online trading academy.