On Wednesday, billionaire investor Paul Tudor Jones (Trades, Portfolio) identified several factors that are driving the market higher on CNBC’s “Squawk Box.”
The guru, who is the founder and chief investment officer of Tudor Investment Corp., pointed to the combination of easy monetary policy in the U.S. and lower taxes, which he believes could push the market into record territory.
“We’ve got an explosive combination of monetary and fiscal policy right now,” Jones said. “We’ve got a 5% budget deficit coupled with the lowest real rates that you can image with the economy at full employment. That’s the most unorthodox, and potentially explosive, combination that you can imagine. It’s like the photo negative of 1930, when we had the last trade war, but you had tight fiscal and tight monetary policy. Now we have the exact opposite.”
The Federal Reserve has cut interest rates three times this year and hinted at last month’s Federal Open Market Committee meeting that more could be coming. The central bank’s rate cuts follow four rate hikes in 2018, which were instrumental in a massive correction at the end of the year and helped pave the way for a record rally for stocks in 2019. Jones said he believes the rate cuts have also helped offset damage from the U.S.’s trade war with China.
Jones also attributed the boost in stocks to lower corporate taxes implemented by President Donald Trump’s administration in 2017.
As for his near-term outlook, the guru is not entirely optimistic. He said that stocks will “definitely decline” if the Democratic presidential candidate defeats Trump in the 2020 election as investors will likely see it as a signal that taxes are going to be raised.
As the chairman and CEO of Just Capital, Jones also discussed the third annual list of “Just” 100 companies, which it publishes in partnership with Forbes. The list ranks how the largest publicly traded companies perform in areas such as worker pay, board diversity and environmental impact, among other criteria.
The top 10 companies on the list were Microsoft Corp. (MSFT, Financial), Nvidia Corp. (NVDA, Financial), Apple Inc. (AAPL, Financial), Intel Corp. (INTC, Financial), Salesforce.com Inc. (CRM, Financial), Alphabet Inc. (GOOG, Financial)(GOOGL), Anthem Inc. (ANTM, Financial), PayPal Holdings Inc. (PYPL, Financial), Procter & Gamble Co. (PG, Financial) and VMware Inc. (VMW, Financial).
Watch the full interview below.
Disclosure: No positions.
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