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The guru, who is the founder and chief investment officer of Tudor Investment Corp., pointed to the combination of easy monetary policy in the U.S. and lower taxes, which he believes could push the market into record territory.
"We've got an explosive combination of monetary and fiscal policy right now," Jones said. "We've got a 5% budget deficit coupled with the lowest real rates that you can image with the economy at full employment. That's the most unorthodox, and potentially explosive, combination that you can imagine. It's like the photo negative of 1930, when we had the last trade war, but you had tight fiscal and tight monetary policy. Now we have the exact opposite."
The Federal Reserve has cut interest rates three times this year and hinted at last month's Federal Open Market Committee meeting that more could be coming. The central bank's rate cuts follow four rate hikes in 2018, which were instrumental in a massive correction at the end of the year and helped pave the way for a record rally for stocks in 2019. Jones said he believes the rate cuts have also helped offset damage from the U.S.'s trade war with China.
Jones also attributed the boost in stocks to lower corporate taxes implemented by President Donald Trump's administration in 2017.
As for his near-term outlook, Jones is not entirely optimistic. He said that stocks will "definitely decline" if the Democratic presidential candidate defeats Trump in the 2020 election as investors will likely see it as a signal that taxes are going to be raised.
"We've got an explosive combination of monetary and fiscal policy right now," Jones said. "We've got a 5% budget deficit coupled with the lowest real rates that you can image with the economy at full employment. That's the most unorthodox, and potentially explosive, combination that you can imagine. It's like the photo negative of 1930, when we had the last trade war, but you had tight fiscal and tight monetary policy. Now we have the exact opposite."
The Federal Reserve has cut interest rates three times this year and hinted at last month's Federal Open Market Committee meeting that more could be coming. The central bank's rate cuts follow four rate hikes in 2018, which were instrumental in a massive correction at the end of the year and helped pave the way for a record rally for stocks in 2019. Jones said he believes the rate cuts have also helped offset damage from the U.S.'s trade war with China.
Jones also attributed the boost in stocks to lower corporate taxes implemented by President Donald Trump's administration in 2017.
As for his near-term outlook, Jones is not entirely optimistic. He said that stocks will "definitely decline" if the Democratic presidential candidate defeats Trump in the 2020 election as investors will likely see it as a signal that taxes are going to be raised.
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