Paul Tudor Jones, a billionaire hedge fund manager and veteran trader, has predicted that stocks will end the year higher.
The investor noted this outlook via comments he made during an interview with CNBC’c “Squawk Box” on Monday.
According to him, the stock market is likely to see an upward grind in the second half of the year and end strongly because the US Federal Reserve is “done” raising interest rates.
The Fed’s path on higher rates had been informed by the need to battle rising inflation, but the Consumer Price Index (CPI) measure has been on the decline for the past 12 months. Jones opined that this augurs well for the stock market.
Commenting on the Fed and the question of inflation and interest rates, the legendary trader told CNBC’s Andrew Ross Sorkin:
“I definitely think they are done. They could probably declare victory now because if you look at CPI, it’s been declining 12 straight months. That’s never happened before in history.”
The investor added that inflation has seen ”a strong downward arc.” His comments come a few days after the latest CPI data showed a cooling to 4.9% – down from the peak of 9% reached in June 2022. Interests rates have been bad for the economy, Jones added, saying that now it’s a matter of waiting out the impact. He compares this to chemotherapy.
“You’ve got to think of interest rates like chemo. Chemo is poison. We’re probably at levels that we’d hit a recession in the past because of the interest tax on the economy. It’s a question of waiting for that tax on the economy to work its way through.”
According to the hedge fund manager, the stock market outlook compared to the picture in mid-2006, with stocks having soared in the aftermath of the Fed’s pause on its tightening cycle. On stocks performance in the coming months, he said he was positive of an upside momentum. However, Jones noted that he is “not rampantly bullish” and that it’s going to be a “slow grind.”
In what could drive stocks higher, the investor pointed to the possibility that there’s huge amounts of dry powder just waiting to be deployed towards investments. He added that the market has seen quite a lull in terms of deals, including a slowdown in IPOs as investors and companies assessed the overall outlook.
US stocks remained wobbly on Monday as the market looked to ride optimism over the debt limit deal – the overall sentiment is that lawmakers are likely to hit a breakthrough on the standoff around the debt-ceiling crisis.
The S&P 500 was flat at $4,124 while the Dow Jones Industrial Average was battling a shaky start to week at 33,382, just below the flatline at -0.24%.
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