On Nov. 13, CNBC interviewed legendary trader Paul Tudor Jones (Trades, Portfolio). Jones talked about his work with just capital that's about changing the mindset in Corporate America. First, he dived into his view on the markets. Jones' interviews are somewhat rare, so these are great occasions to hear about his views. I have summarized the interview in this article, but I highly recommend looking up the video.
According to Jones, there are three things that are broadly driving the markets, the first being that the U.S. has a 5% deficit against a backdrop of the lowest real rates in history. Jones sees this as a photo negative of the late ’30s.
The second thing going on is the presidential race. Candidates have dramatically different policies, so the election will impact where rates and the stock market will go.
The third and final thing is the trade war with China. The world is coming off 50 years of interconnectivity (i.e., global trade and a move towards globalization). The U.S. is beginning to dismember that interconnectivity. The initial impact has been offset by monetary easing, but it put on a fiscal contraction.
Jones identified an "explosive combination" of monetary policy and fiscal policy, which is to the upside. To an extent, we've seen this unfold as the S&P is hitting record highs almost daily again.
Jones is completely mystified as to who is going to be the next president. Regardless of the outcome, the way the impeachment procedure itself unfolds is going to have an impact on whether President Trump gets re-elected. Jones doesn't indicate any preference towards any candidate. He does believe a democrat winning will cause a decline in the stock market, but he doesn’t necessarily think the economy would be damaged.
The Federal Reserve recently said there are no bubbles, but Jones points to the 5% deficit. Presidend Trump believes that budget deficits don’t matter. Under his leadership, the Republican Party is no longer the party of fiscal restraint. But where is the discussion about fiscal policy if we were to have 50 years of low rates and low unemployment? If and when the U.S. starts bringing the federal budget back to something more sustainable, gold prices will absolutely skyrocket.
Disclosure: No positions.
Read more here:
- Howard Marks: This Is Not a Time to Be Aggressive
- David Einhorn Talks Brighthouse, Netflix and Tesla in 3rd-Quarter Letter
- David Rubenstein Interviews Ray Dalio About Bridgewater, Principles and the Next Crisis
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