The fund manager noted that the greatest price appreciation in a bull market typically occurs in the 12 months preceding the peak.
As the market resiliently pushes ahead despite lingering risks, billionaire hedge fund manager Paul Tudor Jones is betting that the rally will likely continue before a crash happens. The S&P 500 Index has been rising for seven straight sessions and ended Monday’s session at a fresh high.
Tudor Investment Corp. founder Jones said, “My guess is that I think all the ingredients are in place for some kind of a blow off.” He made the comments while speaking on CNBC’s Squawk Box on Monday. “History rhymes a lot, so I would think some version of it is going to happen again. If anything, now is so much more potentially explosive than 1999.”
The 1990s rally was set in motion by the dot-com bubble, which pushed technology stocks to unsustainable levels, with Cisco being cited as the poster child of the dot-com era. Jones said the circular deals or vendor financing in the artificial intelligence (AI) space made him “nervous.”
The billionaire, who rose to prominence by accurately predicting the 1987 stock market crash, sees the Fed’s policy as the key difference between then and now. The Fed began rate hikes before the market topped in 2000 after the dot-com bubble burst, whereas the Fed has now just started a new easing cycle, he said. Jones said, “That fiscal monetary combination is a brew that we haven’t seen since, I guess, the postwar period, early ’50s.”
The stock market is on an extended bull run that began in late 2022 and has been progressing without a pullback into the bearish zone. For the year-to-date (YTD) period, the SPDR S&P 500 ETF (SPY), an exchange-traded fund (ETF) that tracks the S&P 500 Index, and the Invesco QQQ Trust (QQQ) have gained 15.6% and 19.3%, respectively. e. All key averages are trading either at new peaks or just off their peaks.
He also delved into the tensions in play when traders play a late-stage bull market, as they are eager to capture outsized gains before a correction sets in. “You have to get on and off the train pretty quick. If you just think about bull markets, the greatest price appreciations always [occur] the 12 months preceding the top,” Jones said.
“It kind of doubles whatever the annual averages, and before then, if you don’t play it, you’re missing out on the juice; if you do play it, you have to have really happy feet, because there will be a really, really bad end to it.”
Jones banks on “speculative frenzy,” “more retail buying,” and “more recruitment from a variety of others from long short hedge funds, from real money, etc.,” for the current bull run to continue.
The hedge fund manager favored gold, cryptocurrencies, and tech stocks listed on the Nasdaq for investment between now and the end of the year, capitalizing on the rally fueled by the fear of missing out (FOMO).
For updates and corrections, email newsroom[at]stocktwits[dot]com.<