Paul Tudor Jones issues a warning to markets: this is the 'most challenging geopolitical environment that I've ever seen'

By William Watts

'I like bitcoin and I like gold right here' says veteran trader who called '87 crash

'The stock market, typically, right before recession declines about 12%.That's probably going to happen at some point from some level.'Paul Tudor Jones, founder and CIO, Tudor Investment Corp.

That's famed hedge-fund manager Paul Tudor Jones in an interview with CNBC Tuesday morning, explaining why he's not enthusiastic about U.S. stocks and other risky assets as he awaits a recession induced by the Federal Reserve's aggressive monetary tightening.

Jones said it's difficult to be positive on equities amid what he described as "the most threatening and challenging geopolitical environment that I've ever seen," which is occurring "at the same time the United States is at its weakest fiscal position since World War II. It's a really difficult time."

A 2023 rally in U.S. stocks has stalled, with the S&P 500 index SPX pulling back 5.5% from a 2023 high set on July 31, leaving the large-cap benchmark up 12.9% for the year to date through Monday's close. The Dow Jones Industrial Average DJIA is up just 1.4% so far this year.

Jones is widely credited with predicting, and profiting, from the stock-market crash on Oct. 19, 1987, which saw the Dow lose nearly 23% of its value, marking the largest one-day percentage decline for the blue-chip benchmark in its history.

So what does Jones like?

"I would love gold and bitcoin, together," he said.

"I think [bitcoin and gold] probably take on a larger percentage of your portfolio than historically they would because we're going to go through a challenging political time here in the United States and...we've obviously got a geopolitical situation" in Israel and Ukraine, Jones said.

Bitcoin (BTCUSD) was off 0.8% near $27,380 Tuesday morning and has rallied around 65% so far in 2023. Gold (GC00) has retreated from a high above $2,000 an ounce earlier this year, slumping below $1,850 last week as Treasury yields marched higher and the dollar strengthened.

A pullback in U.S. bond yields has seen gold bounce 1.4% this week, trading recently near $1,871 an ounce.

Large, speculative short positions in gold will provide fuel for a rally as a recession takes hold, the investor said.

"In a recession, the market is typically really long assets like bitcoin and gold," he said. "So there's probably $40 billion worth of buying that has to come into gold at some point between now and if that recession actually occurs.

"So yeah, I like bitcoin and I like gold right here," Jones said.

-William Watts

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10-10-23 1653ET

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