Hedge Fund Legend Paul Tudor Jones Thinks the Fed Is Done Raising Rates. Is He Right?
Key takeaways
- Hedge fund manager Paul Tudor Jones predicts the Fed is done raising interest rates, citing declining CPI data over a 12-month period
- Fed officials haven’t ruled out further rate rises to bring down high inflation
- U.S. futures have priced in rate cuts by September
What does one of the leading hedge fund voices think about interest rate hikes? They’re done. Hedge fund manager and billionaire Paul Tudor Jones has officially called it that the Fed is finished with interest rate hikes and predicts the stock market will climb further in 2023.
Let’s see how much credence the take has below.
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What did Paul Tudor Jones say?
Billionaire hedge fund manager Paul Tudor Jones told CNBC he believes the Fed is done with this cycle of monetary tightening policy — and that the stock market will continue to lift higher.
His reasoning was that the consumer price index (CPI) had declined 12 months in a row, even saying the Fed could “probably declare victory now”.
Jones said once the debt-ceiling crisis was cleared, it’s plain sailing for the stock market. “Six months from now, stocks are higher, interest rates are lower, there is a halcyon period post last hike where asset prices do OK, commodities barely recover, and the dollar does nothing,” he said.
Is the Fed done raising rates?
A quick look at the most recent economic data confirms that we just don’t know yet. With interest rates now at a target range of 5% to 5.25%, the jobs market and house prices are still sticking points as it stands. Plus, there’s that pesky little debt-ceiling crisis to contend with.
The Fed certainly has a different opinion. Several Fed officials said there was more work to do this week, so raising interest rates isn’t off the table. “We still are well in excess of our 2% inflation target, and we need to finish the job,” Minneapolis Fed president Neel Kashkari said. The Bank of America also thinks we’re heading for a recession and that the markets’ expectations aren’t aligned with the policymakers.
But there is some room for optimism. While US inflation is at 4.9%, over double the Fed’s 2% target, it’s still doing better than the EU and the UK. CPI, PPI and unemployment are trending the right ways.
US futures have also priced in a pause in interest rate hikes for June and July, even anticipating a rate cut by the time we reach September.
The bottom line
Is Paul Tudor Jones being a little optimistic? Possibly, but his views reflect what investors are thinking and the growing opinion difference between Wall Street and the Fed. We’ll have to rely on data closer to the mid-June Fed meeting to see what might happen, but Wall Street will certainly hope it’s right.
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