EDITOR NOTE: If you’ve been scanning financial media over the last week or so, you’re probably getting the sense that financial institutions are positioning themselves for not only a Biden win but a Blue Wave. Famed investor Paul Tudor Jones is one of the bigger whales to issue a warning of severe volatility, saying that he anticipates the next year bringing more volatility than anything he’s seen in the last 40 years of his career. If his prediction turns out to be true, that uncertainty will prevail, the next year may be incredibly bullish for gold and silver, as both benefit directly from economic uncertainty. And this boost will take place amid an already-uncertain economic environment.
In a Thursday morning appearance on CNBC's Squawk Box, billionaire hedge fund manager Paul Tudor Jones said he believes the next six to 12 months could be the most volatile period for markets he's seen in more than 40 years of trading, as a result of a blue wave election outcome that could pump trillions into the American economy.
Tudor Jones, who founded Stamford, Conn.-based Tudor Investment Corporation in 1980, said he believes the U.S. presidential election will result in a victory for former Vice President Joe Biden and a blue wave in which Democrats gain control of the Senate and retain a majority of the House.
That would allow for a "massive" $1.7 trillion stimulus in the next six to 12 weeks that would "undoubtedly benefit Main Street America," with an estimated $700 billion going toward another round of stimulus checks, the 66-year-old said.
Regarding Biden's proposed tax plan, which calls for raising the capital gains tax on those earning more than $1 million annually to 39.6% from 23%, Tudor Jones said he thinks it would do "exactly what it's designed to do, which is to help the average American."
The help would come "at the expense of the 1%, whose wealth is encapsulated in the stock market and financial assets," Tudor Jones added, citing a historically inverse relationship between stock multiples and the capital gains tax, which would be the highest in more than four decades under Biden's proposed plan.
The vast policy initiatives on both the fiscal and monetary fronts could easily trigger heightened volatility, Tudor Jones said, adding that he could see a market sell-off by year's end, followed by a "typical beginning-of-the-year rally" that might ramp up through the end of the first quarter.
"I don't think I've ever seen a time when things are going to be as volatile as they could be over the next six to 12 months because of the huge numbers that are being thrown around both in terms of fiscal packages and the monetary packages… It's going to be a really, really interesting time," Tudor Jones said Thursday morning. "If we have that blue wave… then next year we're going to get a massive fiscal stimulus; we're going to get a big boost to the economy. There's no doubt that Main Street under this program is going to benefit.”
The back and forth on stimulus in Washington, however, still appears far from over. After months of deadlock, House Speaker Nancy Pelosi (D-Calif.) said in a Thursday press briefing that there had been "some progress" in her recently picked up negotiations with the White House, adding that the next aid bill needs to be drafted by the end of the week for coronavirus relief to reach Americans before Election Day–a timeline Wall Street firms like Goldman and Bank of America have said for weeks is unlikely. Even if Pelosi and the Trump Administration agree on a draft, Senate Majority Leader Mitch McConnell (R-Ky.) is the biggest obstacle to any agreement–because without the support of McConnell and other GOP Senators, no new relief proposal will make it to President Trump’s desk at all.
Tudor Jones also doubled-down on his bullish bitcoin outlook, which he revealed to clients earlier this year before saying he was putting 2% of his assets into bitcoin to protect against inflation. "I came to the conclusion that bitcoin was going to be the best defensive trade that you would take… I think we're in the first inning of bitcoin, and it's got a long way to go," Tudor Jones said Thursday, though he also said he believes it's still lagging on mainstream credibility and has yet to prove its long-term staying power.
$5.8 Billion. That's how much Tudor Jones, famous for his macro trades on interest rates and currencies, is worth, according to Forbes, making him one of the 15 richest hedge fund managers in the country.
Originally posted on Forbes