Legendary hedge fund manager and trader Paul Tudor Jones (Trades, Portfolio), the founder and chief investment officer of Tudor Investment Corp. and chairman of Just Capital, discussed the market environment with CNBC’s “Squawk Box” on Monday at the World Economic Forum in Davos, Switzerland.
He compared the current stock market conditions to the latter stages of the bull market in 1999, which pushed the tech-heavy Nasdaq Composite up to nearly 5,000 before the dotcom bubble ultimately popped in March of 2000.
“We are just again in this craziest monetary and fiscal mix in history. It’s so explosive. It defies imagination,” Jones said. “It reminds me a lot of the early ’99. In early ’99 we had 1.6% PCE, 2.3% CPI. We have the exact same metrics today.”
Jones noted that one of the big differences is the federal funds rate, the interest rate at which banks lend reserve balances to other depository institutions overnight, was 4.75% at that time. It is now at 1.62%.
“And back then we had budget surplus and we’ve got a 5% budget deficit,” the billionaire investor added. “Crazy times.”
When asked if investors should sell their stocks now to avoid being crushed, he replied, “Not really. The train has got a long, long way to go if you think about it.”
Jones also pointed out that the Nasdaq Composite has more than doubled from a similar stage leading up to the dotcom crash.
“That’s a long way from now,” Jones said. “At the top theoretically, rates [would] be substantially higher.”
The guru also cautioned that the new “curveball” to derail the bull market could be the coronavirus outbreak in China, which has killed six people so far. According to CNBC, the number of confirmed cases reached 300 on Monday.
“That’s a big deal. If you look at what happened in 2003...stock markets sold off double digits. If you look at the escalation of the reported cases, it feels a lot like that,” Jones said. “There’s no vaccination. There’s no cure...If I was an investor, I’d be really nervous.”
Watch the full interview below.
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