Billionaire hedge fund manager Paul Tudor Jones believes the conditions are set for a powerful bull market surge… followed by a huge market “blow off” crash.
Jones, founder and chief investment officer of Tudor Investment, said Monday on CNBC’s “Squawk Box” that today’s market is reminiscent of the setup leading up to the burst of the dot-com bubble in late 1999.
“My guess is that I think all the ingredients are in place for some kind of a blow off,” Jones said. “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 tech-heavy Nasdaq Composite has bounced 55% from its April bottom to consecutive record highs. The rally has been driven by megacap tech giants investing billions in artificial intelligence.
Jones said the circular deals and financing happening in the AI space made him “nervous.”
The difference between now and 1999 is U.S. fiscal and monetary policy, Jones said. The Federal Reserve just began 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.
“That fiscal monetary combination is a brew that we haven’t seen since, I guess, the postwar period, early ’50s,” he said.
“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.”
Jones is not predicting an immediate downturn. He believes the bull market still has room to run before it reaches its final phase.
“It will take a speculative frenzy for us to elevate those prices. It will take more retail buying. It’ll take more recruitment from a variety of others from long short hedge funds, from real money, etc.,” he said.
Jones said he would own a combination of gold, cryptocurrencies and Nasdaq tech stocks between now and the end of the year to take advantage of the rally fueled by the fear of missing out.
Jones shot to fame after he predicted and profited from the 1987 stock market crash. He is also the co-founder of nonprofit Just Capital, which ranks public U.S. companies based on social and environmental metrics.