Billionaire hedge fund manager Paul Tudor Jones said Wednesday that investors should begin adjusting their portfolios in preparation for a Federal Reserve interest rate cut he believes is coming soon.
According to Jones, be prepared to bet on falling rates and rising gold, and against the U.S. dollar and “at some point” stocks “at least initially,” CNBC said.
The reason for the cut? Tariffs weighing on an already slowing global economy, Jones said.
“I didn’t think we’d have a first cut in 2019,” Jones said. “I don’t think we would have had that had we not gotten into this tariff battle, and so it has accelerated everything.”
Indeed, markets are betting that the Fed enacts multiple rate cuts this year, with the first one likely in July, another in September and possibly a third as soon as December, according to futures pricing tracked by CME. That comes after a 2018 that saw the central bank hike its benchmark interest rate four times to a target range of 2.25%-2.5%.
The uncertainty over tariffs are the key force pushing the Fed toward a rate cut, as well as concerns that a global economic slowdown will spill over into the U.S. economy. President Donald Trump also has been browbeating the Fed for a rate cut, saying a number of times the central bank is playing too tight with monetary policy.
“The tariffs are a very material event,” Jones said. “We haven’t had any experience in modern times with them. So you have to readjust the entire outlook.”
Jones said there will be a short but aggressive period of rate cuts. The Federal Open Market Committee meets next week and could signal its intentions at that time.
Tudor Investment Corporation’s hedge fund has gained about 3.8% through May this year, according to Bloomberg. Its benchmark HFRI Macro Total asst-weighted index is up 0.4% after falling 1.3% in May.