Tudor Jones Says Time for ‘Humble Pie’ About Stock Market

(Bloomberg) — Legendary hedge fund manager Paul Tudor Jones said investors who have been cautious around the stock market have been confounded by the recent rally.

“If there was a franchise for humble pie, oh my lord they’d be a mile long to own that, because we all had huge gulps of it — me included,” Jones, the founder and chief executive officer of Tudor Investment Corp., said Tuesday during a webcast held by The Economic Club of New York. He spoke via video conference in front of a background of the night sky.

“I chose mine because it’s a mixture of the ‘Twilight Zone’ and ‘Lost in Space,’ and that’s a lot how I feel right now as we go through all these issues,” he said.

Jones, 65, is among the Wall Street heavyweights who voiced doubts about markets amid the Covid-19 pandemic. He told clients in early May he was a fan of gold and had put a small percentage of his firm’s assets in Bitcoin as he looked for havens.

But unprecedented government intervention and the unusual nature of the U.S.’s economic woes upended expectations, he said.

As Covid-19 ravaged the globe, policymakers stepped in to support markets, including trillions of dollars in stimulus from Congress and the Federal Reserve.

The reaction was “unlike any response that we’ve ever seen before, and so this is not your garden-variety recession,” Jones said. “Our citizenry has more cash now than they had going into what will be the shortest recession in the history of the United States.”

The S&P 500 index defied initial gloomy expectations surrounding the pandemic, soaring more than 40% since its March low. A better-than-expected jobs report last week added to the optimism, boosting expectations of an economic recovery. On Monday, Stan Druckenmiller — who last month warned about owning stocks — said he now believes he was “far too cautious” during the rally.

Jones was one of the first hedge fund managers to sound warnings about the virus in late January. In March, three days after the market’s low, he said on CNBC that stocks should rally once virus cases peak and predicted that equities would move higher in three to five months.

The flagship hedge fund at his macro firm gained 6.3% in the first five months of the year.

Asked what could bring the rosy picture to an end, Jones said “somewhere down the road” inflation will be an issue.

“Inflation will be almost impossible to check by our central bank because the economy is already top heavy with debt,” he said. “Trying to actually fight inflation is going to be really, really challenging because I don’t think they’ll be able to raise rates enough without having a really deleterious effect on the rest of the economy.”

Tax Rates

On the tax front, Jones expects Democrats to raise the corporate tax rate to as much as 30% if they win in November, with individual rates going to 40% from 37% and a capital gains tax hike to about 40%.

“It probably works out to something somewhere between 2 and 3% of GDP,” he said. “We haven’t seen a tax hike like that since 1968.”

Jones said the pandemic and the death of George Floyd in police custody, which sparked a wave of protests across the U.S., are “galvanizing events” that are showing “inequality in all its forms has reached the tipping point.”

“As a white male, I don’t think I’ve ever been so ashamed and so full of guilt to the point where it’s completely changed the way I think about my politics,” he said. “It’s changed the way that I think I’ve got to manage my company.”

Jones has an estimated net worth of $3.4 billion, according to the Bloomberg Billionaires Index.

(Updates with with comments on taxes in 13th paragraph, inequality in 15th. An earlier version of this story corrected a quote in the 12th paragraph.)

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