Paul Tudor Jones deep recession forecast is the latest bearish call being made by the hedge fund luminary.
“The next recession is really frightening because we don’t have any stabilizers” said Paul Tudor Jones speaking at an event sponsored by Goldman Sac on June 18.
Paul Tudor Jones deep recession forecast is the consensus among the world top investors who argue that the credit cycle has ended, corporate earnings have peaked and a deep recession lies ahead.
Whether it be Bridgewater bearishness extends or Warren Buffett sells
the list of bearish money manager playing the Paul Tudor Jones deep recession tune is growing and investors would have to be deaf not to hear it.
“The next recession is really frightening because we don’t have any stabilizers”
PAUL TUDOR JONES
Paul Tudor Jones deep recession forecast is based on the view that monetary policy has been exhausted following the last 2008 financial crisis. The Fed and other western aligned central banks the ECB, BoJ, and BoE are eagerly moving along a monetary normalization path to prevent further debasement of their fiat currency.
Put another way, the Fed and its western aligned central banks are implementing a coordinate policy of monetary tightening in a backdrop of rising prices and lackluster economic growth.
So Paul Tudor Jones deep recession forecast could be based on the view that the Fed’s primary aim (which is not made public) is to salvage their system of fiat currency (debt money) and dollar hegemony which gives the Fed’s secret shareholders godlike power and wealth.
Paul Tudor Jones deep recession could be on the cards if the above narrative is true that the Fed would rather sacrifice the economy (and do what ever else it takes) to salvage their system of fiat currency.
“Paul Tudor Jones deep recession forecast is based on the view that monetary policy has been exhausted following the last 2008 financial crisis”
Trust is everything for a central bank, particularly if it owns the copyright to the world’s reserve currency. A central bank is like a commercial airline company if the latter keeps crashing no one would want to fly the skies with it. Similarly, when a central bank’s fiat currency crashes investors reject it, no longer want to hold the “paper”. Put simply the same central bank can’t issue a new fiat currency because nobody would trust it.
“We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers” – Paul Tudor Jones
Paul Tudor Jones deep recession view is also based little or no Fiscal wiggle room.
The seven largest economies in the world (G7) are already heavily in debt. So governments will find it more difficult to finance a fiscal expansion policy, bearing in mind that in a declining economy tax receipts are falling. Moreover, credit is becoming more expensive with rising bond yields and higher interest rates likely as the central bank tries to fight off stagflation.
Paul Tudor Jones deep recession view notes that governments are already tapped out and are going to find it challenging to finance Keynesian fiscal expansion projects which are intended to stimulate the economy.
Paul Tudor Jones deep recession view is summed up in one sentence.
”We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers’ said Jones.
Paul Tudor Jones, said the dynamic created by the Federal Reserve, as it attempts to normalize interest-rate policy from the 2007-‘09 financial crisis, is unsustainable, referring to valuations for stocks that many on Wall Street view as pricey.
Paul Tudor Jones comments come as he said just one week ago that stock market and bond yields are set for a ‘crazy’ rise.
“I think you’ll see rates go up and stocks go up in tandem at the end of the year” Paul Tudor Jones said recently.
He made the case that real rates remain historically low and that rising bond yields, which move inversely to bond prices, won’t deter investors from scooping up stocks. But that view goes against conventional wisdom which suggests that higher bond yields will draw capital into bonds away from stocks.
That is conducive to equities being “jacked up and ready to go” he said during his interview with Blankfein on Monday”, added Paul Tudor Jones
But that view goes against conventional wisdom which suggests that higher bond yields draw capital into bonds away from stocks.
Furthermore, equities being “jacked up and ready to go” somewhat contradicts Paul Tudor Jones deep recession.
“A Harley-Davidson should never be built in another country – never!” – Donald Trump
Is Paul Tudor Jones deep recession suggesting that we will see a negative divergence of declining fundamentals and rising stocks?
This doesn’t seem likely bearing in mind that stocks are already trading at a historic price earning ratios. Moreover, with a Trump administration inspired trade war soon in full swing and tit for tat relations coming from China and the EU US corporate earning are likely to take a nose dive going forward.
Already a string of corporate CEOs from Harley-Davidson to Daimler-Benz AG have expressed their concerns that the escalating trade tensions will hit their bottom line.
Harley-Davidson is planning to move its operations overseas.
Trump tweeted today, June 26, “A Harley-Davidson should never be built in another country – never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!”
So Paul Tudor Jones deep recession could hold water.
Indeed, there is amble reason to be bearish on risk assets. The slowing global economy, a trade war but most of all it is the central banks tightening monetary policy in tandem which could be the main reason to take profits and sell.
Paul Tudor Jones deep recession view is a plausible, however, stocks might also be out of gas. So we could see a bear market in the third quarter of 2018.
If Trump loses political ground in the November mid term elections, and we see further political instability then Paul Tudor Jones deep recession and a bear market could be cemented.