In an interview with CNBC’s “Squawk Box” on Monday, renowned investor Paul Tudor Jones (Trades, Portfolio) said he will be paying close attention to this week’s two-day Federal Reserve policy meeting as a result of recent economic data that showed higher consumer prices.
The central bank, headed by Chairman Jerome Powell, has maintained a highly accommodative monetary policy throughout the Covid-19 pandemic. This trend has continued even though massive bond buying and near zero interest rates are no longer necessary since the economic recovery is well underway.
Last week, the Labor Department reported that consumer prices for May accelerated at their fastest pace in nearly 13 years as inflation pressures continued to build in the U.S. The consumer price index, which represents a basket of goods that includes food, energy, groceries, housing costs and sales, rose 5% from a year ago and was ahead of projections of a 4.7% increase.
Fed officials have defended their stance by saying they believe the rising prices are likely only temporary as the economy reopens from all manner of pandemic-related disruptions.
Jones, who heads the New York-based hedge fund Tudor Investment Corp., noted that if the central bank “treats [these numbers] with nonchalance,” it is “just a green light to bet heavily on every inflation trade.”
“If they say, ‘We’re on path, things are good,’ then I would just go all in on the inflation trades. I’d probably buy commodities, buy crypto, buy gold,” he added.
If the Fed changes their tune on Wednesday, however, the guru predicts markets will be unsettled.
“If they course correct, if they say, ‘We’ve got incoming data, we’ve accomplished our mission or we’re on the way very rapidly to accomplishing our mission on employment,’ then you’re going to get a taper tantrum,” Jones said. “You’re going to get a sell-off in fixed income. You’re going to get a correction in stocks. That doesn’t necessarily mean it’s over.”
As of the end of the first quarter, which ended March 31, the five largest holdings of Jones’ firm were the SPDR S&P 500 Exchange-Traded Fund Trust (SPY, Financial), the Industrial Select Sector SPDR (XLI, Financial), Alexion Pharmaceuticals Inc. (ALXN, Financial), Grubhub Inc. (GRUB, Financial) and Navistar International Corp. (NAV, Financial).
Watch the full segment below.
