Speaking at the World Economic Forum in Davos, Switzerland on January 21, 2020, Paul Tudor Jones issued an alarming warning about what lies ahead for the stock market. He’s the chairman of the nonprofit Just Capital and founder of Tudor Investment. Despite speculations that President Donald Trump may reduce aggressive tariffs on Chinese imports, Jones believes that stocks are unlikely to find a bottom in the current macroeconomic climate.
Just Capital, the nonprofit run by Jones, ranks all public companies in the U.S. according to how well they perform socially and environmentally. Jones has a history of highly accurate predictions of big market drops. He forecast the 1987 stock market crash, making for some deep insights from a very wise man.
Speaking during an interview on CNBC’s “Squawk Box” with host Joe Kernen, Jones expressed forthrightly his outlook on the state of the economy today. He wrote that if Trump reduces tariffs from the existing 145% on Chinese imports, it doesn’t do anything to help stocks. They are still all but certain to drop to new record lows. He predicted, “We’re likely headed to the new lows, even after Trump rolls back China tariffs to 50%.
Jones also provided detailed help on how to explain the negative economic growth impact these tariffs will have. He proposed that they be able to slow net new growth just 2% to 3%. And to put it into context, this forecast matches well with his larger warnings about the precarious state of the stock market while macroeconomic conditions worsen.
“In my view, it’s pretty clear. On one hand you’ve got Trump who’s absolutely dug in on tariffs. Then you have the Fed, which is very much locked in on not cutting rates. That’s not good for the stock market,” he said. This sentiment speaks to his fears about the Federal Reserve’s monetary policy and what it means for investors.
The current state of U.S.-China trade policy is extremely tense. China has snubbed U.S. tariffs by slapping the United States with a massive 125% tariff on American products. Now, they are openly deliberating on whether to begin formal trade negotiations with the United States.
Jones had the foresight to predict that the approach of new stock-market lows would trigger a quadruple reaction. From the Federal Reserve and from the Trump administration, we should all expect a vigorous response. He continued, “Short of them getting super dovish and super, super cut, you’re likely gonna go to new lows. When we go out at new lows, a nasty day is almost guaranteed the next day. This would encourage the Fed to act and shape Trump’s reaction form as well. Then finally we’ll arrive at a reality.
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