Taps Coogan – May 19th, 2023

Paul Tudor Jones, founder of Tudor Investment Corp and the man famous for ‘predicting’ the 1987 ‘Black Monday’ stock market crash, recently spoke to CNBC to warn that he sees a recession arriving sometime around Q3 of this year, echoing a similar forecast by Ed Hyman. Nonetheless, he remains cautiously bullish until then.

Some excerpts from Paul Tudor Jones:

“The debt ceiling is going to be Kabuki Theater, a little throw up. The real question is where are we going to be a month from now. A month from now, after it is resolved, where are 2-year rates? My guess is they may be a little higher because risk premium is in everything. Risk premium is in gold, stocks, rates structures, because we are all terrified of the debt ceiling. So, if that (debt ceiling) is gone, gold is probably a little lower, stocks a little higher, rates might be a tough higher because those risk premiums disappear… I think you’ll have some kind of indigestion on the way and, yes, I’d buy that. Then we have, in a more intermediate basis, the financial cycle… which is the combination of the historical debt and asset valuation boom-bust… Post-Covid we had this massive increase in debt, massive increase in equity valuation. It creates this boom in the financial cycle… Our financial cycle, the peak of total debt growth plus stock market valuation occurred in September 2021. Historically, it’s about a two year lag when that really really bites and you go into recession. That would be third quarter this year… there is a really good chance that we’re going to be on the verge of looking like we’re going into a recession… It doesn’t mean the stock market can’t go higher as the economy decelerates (before the recession)… There’s a halcyon period post last hike where asset prices do okay, commodities barely recover, and the dollar does nothing.”

There is more to the interview, so enjoy it above.