Hedge-Fund Boss Who Predicted ‘87 Crash Sees Stock Market, Bond Yields Set for ‘Crazy’ Tandem Rise
Paul Tudor Jones sees ‘things getting crazy particularly at year-end after the midterm elections’
Paul Tudor Jones, a hedge-fund luminary, said he’s expecting bond yields and stocks to rise in tandem toward the end of 2018.
“I think you’ll see rates go up and stocks go up in tandem at the end of the year,” Jones told CNBC Tuesday morning. He makes the case that real rates remain historically low and that rising yields, which move inversely to bond prices, won’t deter investors from buying stocks.
“I can see things getting crazy particularly at year-end after the midterm elections,” Jones said, referring to the potential for U.S. equities to rally after key notes in November.
Conventional wisdom holds that if rates climb too rapidly it could create a headwind for equities because rising rates mean increased borrowing costs for corporations and richer yields can also undercut demand for stocks, compared against the perception of bonds as risk-free assets.
The 10-year Treasury note yield TMUBMUSD10Y stood at 2.97% while the Dow Jones Industrial Average DJIA the S&P 500 index SPX and the Nasdaq Composite Index COMP have mostly been on an uptrend, recovering from a downdraft back in February that sent U.S. stocks down by at least 10%, characterizing what market participants typically view as a price correction. Previously, Jones has predicted that the yield for the 10-year rate will hit 3.75% by the end of 2018.
“I think we’ll see rates move significantly higher beginning some time late third quarter, early fourth quarter,” he said.
Jones is widely credited with predicting, and profiting, from the stock-market crash on Oct. 19, 1987, which saw the Dow Jones Industrial Average lose nearly 23% of its value, marking the largest one-day percentage decline for the blue-chip benchmark in its history. Jones founded Tudor in 1980 and became known for trading everything from currencies to commodities. His record has featured middling returns and an exodus of billions from his hedge fund in more recent years.
On CNBC, Jones on Tuesday also discussed the debut of a social-impact, exchange-traded fund led by Goldman Sachs Group Inc., and modeled after his foundation Just Capital, which ranks company’s on environmental, social and governance, or ESG, principles.