Legendary fund manager sends blunt 7-word message on stocks

Yahoo

08-05-2025

The past couple of weeks have rewarded investors who bought the dip, given the S&P 500 and Nasdaq Composite have returned 13% and 16% since April 9, when President Trump paused the reciprocal tariffs he announced on April 2, so-called "Liberation Day."
The stock market gains have happened in spite of concerning data suggesting the U.S. economy is slowing and growing concern that tariffs could mean stagflation, or worse, a recession is looming.
What happens to stocks next, however, isn't clear. The major market indexes have rebounded into resistance, and some sentiment indicators are flashing overbought.
Related: Veteran analyst sends urgent message on S&P 500
The uncertainty of tariffs' impact on stocks, including a staggering 145% tax on Chinese imports, has prompted many of the most influential market watchers to share thoughts, including legendary billionaire hedge fund manager Paul Tudor Jones.
Jones has been tracking market pops and drops since the mid-1970s, but he's best known for his hedge fund, Tudor Investment Corporation. His success managing money, including predicting the 1987 crash, led to his inclusion in the Market Wizards series of books.
Over the past 50 years, Jones has managed billions of dollars during bull and bear markets. Given his track record, Jones unveiled a stock market forecast this week that investors may not want to ignore.
Paul Tudor Jones, co-chairman and chief investment officer of Tudor Investment Corp., has been tracking the markets for 50 years.Bloomberg/Getty Images
Federal Reserve may be hamstrung by tariffs
The Fed's dual mandate targets low inflation and unemployment. However, those goals are contradictory, often causing the Fed to fall behind the curve when setting monetary policy.
For example, when the Federal Reserve raises interest rates, it slows the economy, contributing to layoffs, but slowing inflation. However, when it cuts interest rates, it accelerates the economy, boosting hiring, but increasing inflation.
Related: Analyst unveils surprising Fed interest rate cut prediction
This relationship is easily seen in how monetary policy has impacted the economy over the past few years. In 2022, Fed Chairman Jerome Powell embarked on the most hawkish rate hike policy since the 1980s after incorrectly predicting inflation during 2021 would be transitory. The decision to delay rate hikes caused sky-high inflation, which peaked at 8% in June 2022.
The Fed's tightening in response to inflation has driven inflation below 3%. However, those hikes have caused cracks in our job market. The unemployment rate has climbed to 4.2% from 3.4% in 2023, and layoffs are rising.
In the first quarter, companies announced 497,000 layoffs, according to Challenger, Gray & Christmas. That was the most in the first quarter since the recession-riddled 2009. In April, 105,441 people were laid off, up 63% year over year.