Paul Tudor Jones speaking at the World Economic Forum in Davos, Switzerland, January 21, 2020.
Adam Galica | CNBC
Billionaire hedge fund manager Paul Tudor Jones expressed the challenges faced by investors in risk assets given the rising geopolitical tensions and the dire fiscal position in the United States.
In an interview on CNBC’s “Squawk Box,” Jones emphasized the difficulties of being an equity investor in U.S. stocks at present. He cited the geopolitical uncertainty along with the United States’ weakest fiscal position since World War II, with debt-to-GDP at 122%.
According to Jones, the Israel-Hamas conflict poses the most threatening geopolitical environment and could lead to a risk-off market. Additionally, increasing interest rates have further weakened the fiscal health of the United States as the country accumulates more debt.
With interest costs rising, Jones explains the vicious cycle that occurs: higher interest rates result in higher funding costs, leading to increased debt issuance, which in turn causes bond liquidation and further pushes up rates. This situation puts the U.S. in an unsustainable fiscal position.
Jones, the founder and chief investment officer of Tudor Investment, rose to fame after successfully predicting and profiting from the 1987 stock market crash.
Regarding future investments, Jones stated that he would wait for a resolution of the Israel-Hamas conflict. He wants to assess the potential impact before considering risk assets again, even mentioning the possibility of a nuclear war.
“From a personal standpoint, would I be investing in risk assets now and stocks until I saw what the resolution was with Israel, Iran?” said Jones. “Israel is going to respond in some way, shape, or form. The determination of whether Iran was actually responsible is enormous because again, it has the possibility to really escalate into something terrible.”
Jones is also known as the chairman of nonprofit organization Just Capital, which evaluates and ranks public U.S. companies based on social and environmental metrics.
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