Billionaire hedge fund manager Paul Tudor Jones is convinced that the stage is set for a significant leap in stock prices ahead of the peak of the bull market.
“I suspect that all the elements are in place for some sort of a blow-off,” Jones expressed Monday on CNBC’s “Squawk Box.” “History tends to repeat itself, so I believe some form of this is likely to occur again. In fact, the situation now is much more potentially explosive than it was in 1999.”
The founder and chief investment officer of Tudor Investment suggested that the current market mirrors the conditions preceding the collapse of the dot-com bubble in late 1999, marked by significant rallies in technology stocks and increased speculative activity. Jones mentioned that the circular transactions or vendor financing occurring in the artificial intelligence sector currently left him feeling “uneasy.”
The Nasdaq Composite, heavily weighted with tech stocks, has rebounded 55% from its low in April to achieve consecutive record highs. This rally has been propelled by major tech companies, which have poured billions into AI and are being highly valued on the prospects of this developing era.
The distinction between the present and 1999, according to Jones, lies in the fiscal and monetary policies of the U.S. At that time, the Federal Reserve was just beginning a new easing cycle, while interest rate hikes were looming prior to the market peak in 2000. Currently, the U.S. is operating with a 6% budget deficit, whereas in 1999, there was a budget surplus of $99,000, Jones noted.
“This fiscal and monetary mix is a concoction that we haven’t encountered since, I suppose, the postwar era, early ’50s,” he mentioned.
The seasoned investor underscored the paradox at the core of any late-stage bull market — the desire to seize substantial profits and the unavoidable reality of a harsh correction.
“You need to get on and off the train pretty swiftly. If you’re solely focused on bull markets, the greatest price surges typically happen in the 12 months leading up to the peak,” Jones stated. “It essentially doubles the annual averages, and before that, if you don’t participate, you’re missing the opportunity; if you do participate, you need to be extremely nimble, as there will be a very, very tough conclusion to it.”
However, Jones is not forecasting an imminent decline. He believes the bull market still possesses the potential for further extension before reaching its ultimate phase.
“It will require a speculative frenzy for us to elevate those prices. It will necessitate increased retail purchasing. It will require further recruitment from a multitude of sources, including long-short hedge funds, real money, etc.,” he stated.
He indicated he would favor a blend of gold, cryptocurrencies, and Nasdaq tech stocks from now until the year’s end to capitalize on the rally driven by fear of being left out.
Jones gained prominence after predicting and profiting from the 1987 stock market crash. He is also the co-founder of the nonprofit Just Capital, which evaluates public U.S. companies based on social and environmental criteria.
Correction: The tech-heavy Nasdaq Composite has rebounded 55% from its April low to consecutive record highs. A prior version incorrectly stated the percentage.
