Hedge fund billionaire Paul Tudor Jones told CNBC’s “Squawk Box” the U.S. economy is either already in a recession or on the cusp of one.
Stocks are down 10% this year but have more to fall, and if a recession manifests itself, it will have negative consequences for a variety of assets, said Jones, who shot to fame after predicting the 1987 stock market crash.
“Most recessions last about 300 days from the commencement of it,” Jones, founder and CEO of Tudor Investment, said Monday. “The stock market is down, say, 10%. The first thing that will happen is short rates will stop going up and start going down before the stock market actually bottoms.
“I don’t know whether it started now or it started two months ago,” Jones continued. “We always find out, and we are always surprised at, when recession officially starts, but I’m assuming we are going to go into one.”
Jones said the Federal Reserve, which has been tightening its monetary policy at the most aggressive pace since the 1980s, must continue to increase interest rates to get inflation back to the 2% range, a condition he calls necessary for the long-term prosperity of the nation.
However, rising wages are difficult to tame, so the task ahead for the Federal Reserve is going to be arduous, Jones added:
“Inflation is a bit like toothpaste. Once you get it out of the tube, it’s hard to get it back in. The Fed is furiously trying to wash that taste out of their mouth….If we go into recession, that has really negative consequences for a variety of assets.”
The famed investor stressed: “If they don’t keep going, and we have high and permanent inflation, it just creates more issues down the road. If we are going to have long-term prosperity, you have to have a stable currency and a stable way to value it. So, yes, you have to have 2% and under inflation in the very long run to have a stable society. So, there’s short-term pain associated with long-term gain.”
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