Important takeouts:
-
Paul Tudor-Jones expects a massive advantage in the US market, but notes that the market peak requires extensive retail and institutional participation.
-
The US stock market valuation and economic situation do not point to an immediate slump, supporting a paper with ongoing speculative momentum.
Billionaire investor Paul Tudor Jones believes US financial markets are far from the bubble, pointing to the growing US government’s fiscal crisis as a catalyst for risk-on assets, including Bitcoin (BTC). Tudor’s main papers rely on loose monetary policy, retail flows and speculation.
US fiscal liabilities support the allocation of risk-on assets, including Bitcoin
In July, US President Donald Trump signed “One Big Beautiful Bill,” according to the Congressional Budget Office, extending tax cuts, raising debt caps, and creating the impact of a $2.1 trillion deficit by 2029.
For the first time in history, interest on US debt is projected to exceed $1 trillion in 12 months, with analysts expecting a 127% debt-to-GDP ratio in 2026. Such fiscal stress raises questions about the confidence in the U.S. ability to pay back debt, as investors worry that governments need to inflate or reduce the value of their cargo if they don’t.
These concerns intensify as 33% of the US Treasury Department is held by foreign companies. It tends to inject liquidity and curb actual yields. These holders put downward pressure on demand for the Treasury and the dollar itself in search of better return opportunities elsewhere.
Tudor Jones elicited similarities to the 1999 period, marking a 90% profit for the Nasdaq in five months, culminating in the 2000 “Dot-com Crush.” However, this time the conditions are much better. First of all, the US Federal Reserve raised interest rates in 1999, starting the year at 4.75%, and entered 5.5% in 2000.
Another difference comes from the tightening direction that spread throughout 1999. The Fed’s balance sheet had signed $5.38 trillion by early 2000, from $8.66 trillion the previous year. Today the script is reversed. With signs of softening, especially in the labor market and providing speculative momentum and extended runways, the Fed is unlikely to shrink its balance sheet for the next 12 months.
Tudor Jones says the speculative frenzy is far away and expects more profits
Tudor expects a “large gathering” that is “a much more potentially explosive than in 1999”, but it claims that the market is far from a “speculative frenzy” now. Tudor added that before the “blow-off” top, he added “more retail purchases will be needed” and “real money.” Tudor-Jones does not predict an immediate slump, and stock market metrics support this paper.
According to Yardeni research data, the S&P 500 has multiple seating from price to revenue, near 23 times, well below the 25x peak seen in 2000.
Tudor expects “speculative fatigue” to ultimately set, but not the sudden collapse usually associated with bubble bursts. Tudor Jones recommends allocations that lean towards growth stock, gold and Bitcoin as a hedge against inflation and fiscal stress.
Bitcoin’s $2.5 trillion market capitalization remains modest at Gold’s $26 trillion and the S&P 500 at $57 trillion. So even if Bitcoin absorbs less than 3% of the $7.37 trillion sitting in the money market, an inflow of $200 billion could significantly move the direction of price.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.