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An even bigger stock market rally than the one in 1999 could be on the way, says Paul Tudor Jones.
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The billionaire investor believes loose fiscal and monetary policy could generate “huge” gains.
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The end result could be a “missing” of the market’s peak moment, he said.
Stocks may be headed for an even bigger rally than the one that preceded the eventual dot-com crash of the early 2000s.
Paul Tudor Jones, the famed hedge fund investor and founder of Tudor Investment Corporation, said he foresaw an even bigger and more “explosive” rise in the stock market than investors witnessed in 1999. That could eventually lead to an “explosion” of the top, he suggested, pointing to two factors in particular that could spark the rally.
“I think all the ingredients are in place and certainly from a business standpoint you have to position yourself as if it were October 1999,” the billionaire hedge funder told CNBC on Tuesday, adding later that he believed the current environment was ripe for “massive” price appreciation. “If anything, it’s much more potentially explosive now than it was in 1999.”
Jones said he believed the market has two ingredients in particular that could trigger such a rally.
Loose monetary policy is the first. The Federal Reserve is widely expected to continue cutting interest rates, a long-awaited bullish catalyst that is expected to boost the price of risk assets such as stocks and cryptocurrencies.
Central bankers are operating partially blind due to postponed economic data releases as a result of the government shutdown. However, Federal Reserve officials are largely expected to cut rates another 50 basis points through the end of this year, according to the CME FedWatch tool.
The second ingredient is a lax fiscal policy. The US budget deficit for 2025 has risen to about $1.8 trillion, or 6% of GDP, Jones said. This is a much more stimulating environment compared to the late 1990s, when the United States had a budget surplus.
Markets have not seen such an ideal environment for stocks in terms of monetary and fiscal policy in the postwar period, Jones said.
Despite comparisons to a previous bubble, Jones suggested it was not necessarily a time for investors to skimp on equity allocations or flock to other assets. The market has generally seen the highest returns in the 12 months leading up to the peak of the bubble, he said, adding that he believed investors should hold a mix of gold, cryptocurrency and technology stocks in their portfolios.
“It’s like the Prince song,” Jones said. “Party like it’s 1999, right? It feels exactly like 1999.”
Read the original article on Business Insider