Billionaire hedge fund manager Paul Tudor Jones has warned about the U.S. government’s current fiscal deficit and the increased spending promised by both presidential candidates, saying bond markets may force government action to address the problem after the election.
“Unless we get serious about spending, we’re going to be broke very quickly,” Jones told CNBC’s Andrew Ross Sorkin on Tuesday.
The founder and chief investment officer of Tudor Investment Co. said he is worried that government spending could cause a sharp sell-off in the bond market and push interest rates higher. He said he plans to hold no fixed income and will short the longer-dated portion of the bond market.
“The question is, after this election, are we going to have a Minsky moment in the U.S. and U.S. debt markets?” Jones said, referring to shorthand for a sharp decline in asset prices.
“Are we going to have a Minsky moment where suddenly people realize that what they’re talking about is fiscally impossible, economically impossible?” he continued.
Federal deficit surges to 2024 $1.8 trillionThat’s an 8% increase from 2023, according to the Treasury Department.
The government offsets this deficit by selling Treasury bonds, whose maturities and pace of sales are closely watched by Wall Street traders. Rising interest rates over the past three years are another concern for many economists and traders because they make the government’s annual debt costs higher.
Jones noted in the interview that the budget deficit increased under former President Donald Trump and President Joe Biden, and said Trump and Vice President Kamala Harris were “the least qualified to have the budget in front of them.” work”. He also said he remains concerned about inflation, especially if Trump wins.
The hedge fund manager said there are ways for the government to better align spending, but significant changes may be needed, such as allowing Trump’s first-term tax cuts to expire or making deep cuts to the federal workforce.
Jones founded his hedge fund more than four decades ago and became famous for correctly predicting the 1987 stock market crash.
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