Paul Tudor Jones speaking at the World Economic Forum in Davos, Switzerland, on Jan. 21, 2020.
Adam Galica | CNBC
Billionaire hedge fund manager Paul Tudor Jones believes the conditions are set for a powerful surge in stock prices before the bull market tops out.
“My guess is that I think all the ingredients are in place for some kind of a blow off,” Jones said on CNBC’s “Squawk Box” Monday. “History rhymes a lot, so I would think some version of it is going to happen again. if anything, now is so much more potentially explosive than 1999.”
The founder and chief investment officer of Tudor Investment said today’s market is reminiscent of the setup leading up to the burst of the dotcom bubble in late 1999, with dramatic rallies in technology shares. Jones said the circular deals or vendor financing happening in the artificial intelligence space today also made him “nervous.”
The difference between now and then is the U.S. fiscal and monetary policy, Jones noted. The Federal Reserve had just begun a new easing cycle, whereas rate hikes were on the way before the market top in 2000. The U.S. is now running a 6% budget deficit, while in 1999, there was a budget surplus in $99,000, Jones said.
“That fiscal monetary combination is a brew that we haven’t seen since, I guess, the postwar period, early 50s,” he said.
Jones shot to fame after he predicted and profited from the 1987 stock market crash. He is also the chairman of nonprofit Just Capital, which ranks public U.S. companies based on social and environmental metrics.
“You have to get on and off the train pretty quick. If you just think about bull markets, the greatest price appreciations always [occurs] the 12 months preceding the top,” Jones said. “It kind of doubles whatever the annual averages, and before then, if you don’t play it, you’re missing out on the juice; if you do play it, you have to have really happy feet, because there will be a really, really bad end to it.”
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