The current decade will be focused on debt dynamics around the globe, fiscal deficits, and creating monetary policy that will give people confidence in the long-term, Paul Tudor Jones of Tudor Investments told CNBC in a recent interview. There’s been so much experimentation in monetary policy over the last 12 years, suppressing yields, and this decade will see a reversal of that, which we’re already seeing from the Fed.
“Fiscal retrenchment” will be necessary, as we experience higher term premiums in both the stock and bond markets, Tudor Jones said. There’s been too much money and too much fiscal spending, which has brought about such high inflation, but at some point assets like crypto, such as bitcoin and ethereum, of which there are finite amounts, will come back in a much higher value than where it is currently.
Meanwhile, Tudor Investments is “getting ready to go through the recession playbook,” Tudor Jones said, on the assumption that we will be in a recession soon, if we aren’t already. Most recessions last about 300 days; at its start, the stock market will be down about 10% and short rates will stop going up and then start to decline before the market itself hits bottom. Term premiums will go back into an array of assets in both the stock and bond markets, leading to a bond market sell-off—and that’s already starting to happen, Tudor Jones contends.
There will be a point when the Fed halts their rate hikes, and at that point there will likely be a huge rally in a “variety of beaten-down inflation trades,” Tudor Jones said—and crypto will be included in that. But when asked by CNBC when he expects that to happen, Tudor Jones said that it was possible it hasn’t even started yet, though when the NVR goes back to pinpoint the date when the recession officially started, he expects it to be within a month or two from now.