Billionaire hedge fund supervisor Paul Tudor Jones believes that inflation is right here to keep, posing a serious threat to the U.S. markets and financial system.
“I think to me the number one issue facing Main Street investors is inflation, and it’s pretty clear to me that inflation is not transitory,” Jones mentioned on CNBC’s “Squawk Box” Wednesday. “It’s probably the single biggest threat to certainly financial markets and I think to society just in general.”
Jones mentioned the trillions of {dollars} in fiscal and financial stimulus is the wrongdoer for inflation to run hotter for longer. To rescue the financial system from the Covid-19 pandemic, the Federal Reserve has been shopping for extra than $3 trillion in 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,” Jone mentioned. “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 mentioned value pressures will proceed to rise within the coming months. Inflation ran at a recent 30-year excessive in August amid provide chain disruptions and terribly robust demand.
The core private consumption expenditures value index, which is the Fed’s most popular measure of inflation, elevated 0.3% for the month 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 mentioned.
Jones mentioned it is time to double down on inflation hedges together with commodities and TIPs breakevens, and that buyers ought to keep away from fastened earnings on this inflationary and low-rate surroundings.
“You don’t want to own fixed income. You don’t want to hold that whatsoever. What they are telling you by their actions is that they will be slow in fighting inflation,” Jones mentioned.
Jones is the founder and chief funding officer of Tudor Funding Company. He shot to fame after he predicted and profited from the 1987 stock-market crash. He’s additionally the chairman of non-profit JUST Capital, which ranks public U.S. corporations based mostly on social and environmental metrics.
That is breaking information. Please verify again for updates.
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