Copyright Markets Insider
Stocks may be headed for a rally even bigger than the one that preceded the evental dot-com bust of the early 2000s. Paul Tudor Jones, the famed hedge fund investor and the founder of Tudor Investment Corporation, said he foresaw an even bigger, more "explosive" run-up in the stock market than what investors witnessed in 1999. That could eventually lead to a "blow off" 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 trading standpoint, you have to position yourself like it's October of 1999," the billionaire hedge funder told CNBC on Tuesday, later adding that he believed the current environment was conducive to "massive" price appreciation. "If anything, now is much more potentially explosive than 1999." Jones said he believed the market has two ingredients in particular that could unleash such a rally. Loose monetary policy is the first. The Fed is largely expected to continue cutting interest rates, a long-awaited bullish catalyst that's expected to boost the price of risk assets like stocks and crypto. Central bankers are operating partially blind due to postponed economic data releases as a result of the government shutdown. However, Fed officials are largely expected to cut rates another 50 basis through the end of this year, according to the CME FedWatch tool. The second ingredient is loose fiscal policy. The US budget deficit for 2025 has risen to around $1.8 trillion, or 6% of GDP, Jones said. That's a far more stimulative environment when compared to the late 1990s, when the US was in a budget surplus. Markets haven't seen such an ideal environment for stocks in terms of monetary and fiscal policy in the post-war period, Jones said. Despite the comparisons to a previous bubble, Jones suggested it wasn't necessarily a time for investors to skimp on allocations to stocks or flock to other assets. The market has typically seen the steepest returns in the 12 months leading up to the peak of the bubble, he said, adding that he believed investors should have of mix of gold, crypto, and tech stocks in their portfolios. "It's like the Prince song," Jones said. "Party like it's 1999, right? It feels exactly like 1999."
