(Bloomberg) -- Paul Tudor Jones, the billionaire hedge fund manager, said efforts to stimulate global economies are boosting equities in a way he’s never seen before.
Governments and central bankers from Japan to the U.S. are taking steps to stave off slowdowns amid international trade tensions and increasing recession fears. Jones, the founder of Tudor Investment Corp., said low interest rates and budget deficit spending will be a boon for the markets.
“I just look at the fiscal monetary mix, it’s the most stimulative that I think I’ve ever seen,” he said. “It’s no wonder that the stock market’s hitting new highs. It’s literally the most conducive environment, certainly in the short run, for economic growth and strength that I’ve ever seen.”
Jones, a macro trader who for years has bemoaned the lack of market volatility because of quantitative easing, also warned that during the next downturn the country will face a dangerous expansion of the deficit.
The S&P 500 Index is up 23% this year, and the U.S. Federal Reserve has cut benchmark rates three times. The budget deficit widened to almost $1 trillion in the latest fiscal year, surging to the highest level since 2012 as President Donald Trump cut taxes and boosted spending.
Jones was speaking with fellow billionaire fund manager Ray Dalio Tuesday at the Greenwich Economic Forum in Connecticut. Dalio said that another effect of low rates is that investors are more willing to listen to companies selling ambitions rather than making a profit.
“Because the world is looking for a yield or something, companies also can sell dreams rather than earnings,” he said. “So the number of companies that produce earnings is the lowest since the dot-com bubble in terms of their need because you can sell the dream.”
Startups including office-sharing company WeWork and ride-sharing business Uber Technologies Inc. have attracted investors despite not producing profits, in part because of the strength of their branding and strategic plans.
Jones also said Tuesday that next year’s presidential election “will be more meaningful than any in my lifetime.”
The S&P 500 would drop about 25% if Democratic Senator Elizabeth Warren were to win in 2020, Jones has previously said.
Warren, who advocates for a 2% tax on America’s richest families, “Medicare for all” and new regulations on private equity, has been stoking fear on Wall Street as she’s gained momentum in the lead-up to the Democratic primaries. Hedge fund managers including Steve Cohen, Rob Citrone, and Leon Cooperman have warned she would tank the market.
Dalio focused much of his comments on economic inequality in the U.S. He said the country’s wealth gap will not be fixed unless Trump and other leaders take charge of what he called a “national emergency.”
Economists, policy makers and presidential candidates have been grappling with how to narrow the widening divide between the rich and poor. The issue shaped the 2016 presidential race and has emerged as a key theme among Democrats in the current contest, particularly Warren and Senator Bernie Sanders.
(Updates with additional comments from Jones and Dalio starting from fourth paragraph.)
--With assistance from Melissa Karsh.
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