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Paul Tudor Jones warns that inflation may be the greatest threat to the markets and society.
Jones, who leads Tudor Investment Corporation and is known for predicting the 1987 Black Monday stock market crash, pushed back on the Federal Reserve’s assertions that high inflation is merely a fleeting phenomenon that will fade away.
“I think, to me, the No. 1 issue facing Main Street investors is inflation, and it’s pretty clear to me that inflation is not transitory,” Jones said Wednesday on CNBC. “It’s probably the single biggest threat to certainly financial markets, and I think to society just in general.”
Jones noted that throughout the COVID-19 pandemic, the federal government has spent trillions and eased monetary policy to counter problems stemming from the health crisis.
The Fed has kept its interest rate target near zero and has said it is unlikely to raise until the country reaches full employment. The central bank has also purchased $120 billion in Treasury bonds and mortgage-backed securities per month.
Congress rammed through a $1.9 trillion fiscal package that included stimulus payments to most people in the United States. President Joe Biden and congressional Democrats also seek to spend trillions more on infrastructure and social programs.
“Inflation can be much worse than what we fear. We have the demand side of the equation ... and that is $3.5 trillion greater than what it normally would have ... just sitting in liquid deposits,” Jones said. “They can go into stocks, or crypto, or real state, or be consumed, so that’s a huge amount of dry powder just sitting waiting to be utilized at some point, which is why inflation is not going away.”
Consumer prices rose 5.4% for the year ending in September, according to a report by the Department of Labor released this month — the highest pace of inflation since 2008. The number was a bit higher than the expected 5.3% rate, further exacerbating fears of too-high inflation sticking around.
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Original Author: Zachary Halaschak
Original Location: Inflation 'single biggest threat' to society, billionaire investor warns