Billionaire macro trader Paul Tudor Jones said investors should buy stocks on the likelihood of new market highs and an interest rate cut.
“We should be long stocks right now,” he said in a Bloomberg Radio interview Wednesday.
President Donald Trump’s tariff battle with China boosts the chances of a Federal Reserve reduction, setting the stage for the strategy. The trade is part of a standard playbook he calls “first rate cut 101,” which includes being long rates, gold and “at some point short the dollar,” Jones said Tuesday in an interview.
Jones said the Fed is “probably on the cusp of the first rate cut after a long hiking cycle.”
Like many traders, he’s gearing up for an aggressive but short rate-lowering cycle. Jones, 64, who runs Tudor Investment Corp., said last June that he expected rates to climb “significantly” by the end of 2018. The central bank went on to hike the federal funds rate three times by year-end, each time by 25 basis points.
“I didn’t think we’d have a first cut in 2019,” Jones said ahead of an event today in New York sponsored by his non-profit organization JUST Capital. “I don’t think we would have had that had we not gotten into this tariff battle, and so it has accelerated everything.”
Trump threatened earlier this week to raise tariffs on China if President Xi Jinping doesn’t meet with him at the upcoming Group of 20 summit in Japan. The U.S. leader told reporters he could impose tariffs of 25% or “much higher” on $300 billion in goods from the world’s second-biggest economy.
“The tariffs are a very material event,” Jones said. “We haven’t had any experience in modern times with them. So you have to re-adjust the entire outlook.”
The tariffs sped up where “the Fed would have ultimately gone and fast-forward the possibility —- and I double underscore possibility — that we’re going to get a more protracted global slowdown,” Jones said.
It’s far from business as usual.
“I don’t know what the long-run consequences will be,” he added. “The consequences will be slower-moving than many people anticipate.”
Tudor’s main hedge fund rose about 3.8% in the first five months of the year, according to a person familiar with the matter. That compares with a 0.4% gain for the HFRI Macro Total Asset Weighted Index. Tudor returned 10% in 2018.
Jones also discussed the exchange-traded fund comprising socially responsible companies that JUST Capital started last year. In its first few days of trading in June 2018, the fund had a market capitalization of about $250 million. Now, it’s down to $125 million after Goldman Sachs Group Inc. pulled its seed capital.
“I don’t think the world fully understands the JUST ETF yet,” he said. Still, Jones isn’t dissuaded and believes the ETF, which is up 5.1% since inception, will eventually become popular.
JUST Capital rates companies on social, environmental and governance performance as well as return on equity. Each year they get re-ranked based on factors like how well they pay and treat their workforce and how socially beneficial their products are, Jones said.
“I own the ETF personally,” he said. “It’s the only equity I do own.”