In an interview with CNBC’s Squawk Box co-anchor Andrew Ross Sorkin on Monday (15 May 2023), billionaire hedge fund manager Paul Tudor Jones II voiced his perspective on the current economic climate. According to Jones, the Federal Reserve is unlikely to raise interest rates further amidst a falling Consumer Price Index (CPI) and a potential recession on the horizon.
The Federal Reserve’s strategy since March 2022, which has included ten interest rate hikes aimed at curbing inflation, has placed a strain on risk assets such as Bitcoin (BTC). Jones suggests that this period of escalating rates may be coming to an end. He points to the unprecedented 12-month consecutive decrease in CPI as an indicator of a significant downward trend in inflation.
In Jones’ view, these rate hikes have taken the nation to the brink of a historical recession threshold. However, he doesn’t anticipate immediate rate cuts by the Fed. He asserts that while trailing 12-month inflation will play a role in the Fed’s decision, the current market conditions suggest that most inflation has been eradicated.
The billionaire drew a parallel between interest rates and chemotherapy, describing both as poisons. Considering the vast amount of sector-wide debt shared by private consumers and the government, Jones suggests that current interest rates are at a level where a recession has usually been triggered in the past due to the ‘interest tax’ on the economy.
Jones expressed ambivalence about the Fed’s most recent 0.25 percentage point rate hike, indicating he could have been convinced to vote either way. Despite any reluctance, he believes that equity prices will continue to rise through the rest of the year, thus influencing the broader business cycle.
With regard to Bitcoin, he said:
“From the beginning, I’ve always said I want to have a small allocation to it because … it’s the only thing that humans can’t adjust the supply in. So I’m sticking with I. I’m going to always stick with it as a small diversification in my portfolio.“
He later added:
“[Bitcoin and gold have] done so well recently because of the fact that we have had these great risk premiums. I wonder whether they may not be boring in the future. Bitcoin has a real problem because, in the United States, you have the entire regulatory apparatus against it … If inflation is truly done a bit if that story’s been played, then you have to wonder: we were buying gold and Bitcoin for the inflation hedges – that game may be over.“
