Hedge fund billionaire Paul Tudor Jones says stocks are headed for fresh lows even if China trade tensions ease

Business Insider

06-05-2025

Stocks are probably headed to a new bottom, even if China tariffs are dialed back, Paul Tudor Jones says.
The legendary investor thinks the market is under too much pressure from tariffs and interest rates.
The market won't rally until a new low prompts either Trump or the Fed to blink, he said on Tuesday.
Stocks have clawed back most of their losses since the historic April sell-off, but the market might be headed for fresh lows, hedge fund legend Paul Tudor Jones said.
The billionaire Wall Street veteran and Tudor Investment Corporation CIO said he believes stocks are likely heading to a new low in the near future, even if trade tensions between the US and China are dialed back.
Jones told CNBC on Tuesday that the markets are under too much pressure from trade volatility and high interest rates — and neither of those factors is likely to ease unless another big drop in stocks forces a change.
"For me, it's pretty clear. You have Trump who's locked in on tariffs. You have the Fed who's locked in on not cutting rates. That's not good for the stock market," Jones said.
The S&P 500 has clawed back most of its losses since the tariffs-fueled sell-off last month. Stocks moving back to another low would imply the benchmark index falling to at least 4,982, a 10% decline from current levels.
Jones added that markets are expecting Trump to dial back his tariffs on China significantly. The president has threatened a 145% tariff on goods from China, but investors are probably pricing in a tariff rate of about 50%, he estimated.
But even if tariffs were to be slashed to that level, the impact of the duties would still be equivalent to the largest tax hike imposed on US consumers since the 1960s, which could potentially shave off around 2 to 3 percentage points of US GDP, Jones said.
The Fed, meanwhile, insists on proceeding cautiously with rate cuts. According to the CME FedWatch tool, markets are pricing in a near-100% chance the central bank will leave rates unchanged at this week's policy meeting.
Jones said that unless the Fed turned suddenly dovish, the market is probably making new lows, after which Trump or the central bank could respond with policy action that enables a new rally.
Other forecasters on Wall Street have expressed wavering confidence in the outlook for stocks.
Wells Fargo said it wouldn't be surprised if the S&P 500 retested its lows from the initial tariffs-fueled sell-off, due to lingering economic pressures from trade policy.
"We keep getting the absolutely rational question: 'Have we seen the bottom in stocks?' As much as we would like to boldly answer that question with a resounding 'yes!' that just isn't the case. Again, tariff and growth concerns are the main market drivers right now, but there will likely be a few other issues that result in road bumps in the months ahead," Scott Wren, a senior global market strategist at the bank, wrote in a note last week.
HSBC also said it remains "tactically cautious" on risk assets.
"Where we've seen upside surprises in hard data lately, this has largely been due to frontloading. Forward-looking indications are for hard data to feel the pain soon, perhaps already in the next month or two," the bank said in a note on Tuesday.