- Paul Tudor Jones predicts new stock market lows due to President Trump’s 145% tariffs on Chinese imports and the Federal Reserve’s steady 4.25% – 4.5% interest rate policy, which he views as detrimental to equities.
- Even if Trump reduces tariffs to 50% or 40%, Jones warns of economic growth declining by 2%-3%, likening the impact to the largest tax increases since the 1960s.
- The S&P 500 (^GSPC), currently 8% below its all-time high, faces further downside unless the Fed adopts a dovish stance with significant rate cuts, according to Jones.
The financial markets are grappling with a grim outlook as billionaire hedge-fund manager Paul Tudor Jones warns of new stock market lows, driven by President Donald Trump’s aggressive trade policies and the Federal Reserve’s steadfast monetary stance. Speaking on CNBC’s “Squawk Box,” Jones highlighted the detrimental combination of Trump’s unwavering commitment to tariffs and the Fed’s refusal to cut rates, stating, “You have Trump who’s locked in on tariffs. You have the Fed who’s locked in on not cutting rates. That’s not good for the stock market.” Trump’s imposition of 145% tariffs on Chinese imports this year, met with China’s retaliatory 125% levies, has already sparked significant volatility, with the S&P 500 (^GSPC) enduring a sharp sell-off before recovering to a level 8% below its all-time high. Jones, the founder of Tudor Investment and a legendary investor who famously profited from the 1987 market crash, remains skeptical of a near-term recovery, even if Trump reduces tariffs to 50% or 40%, describing such a move as equivalent to the largest tax increases since the 1960s, potentially shaving 2% to 3% off economic growth.
The Federal Reserve’s decision to maintain its key overnight lending rate between 4.25% and 4.5% since December further complicates the economic picture. Fed Chair Jerome Powell has emphasized a cautious approach, indicating that policymakers will “wait for greater clarity” on the fallout from trade policies before making adjustments. Jones believes this rigidity, absent a significant shift to a dovish stance with substantial rate cuts, will push stocks to new lows. He suggests that only after reaching these depths might market pressures force both the Fed and Trump to recalibrate their approaches, potentially stabilizing conditions. The prospect of China initiating trade negotiations with the U.S., as signaled last week, offers a glimmer of hope, but Jones remains unconvinced that near-term relief is forthcoming. His perspective is informed by decades of market experience and his current role as chairman of Just Capital, a nonprofit focused on evaluating U.S. companies’ social and environmental performance. As macroeconomic headwinds intensify, Jones’ prognosis underscores the challenges facing investors navigating a landscape marked by trade tensions and monetary policy constraints.
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