Source: Jinshi Data
Billionaire hedge fund manager Paul Tudor Jones made a significant statement in an interview with CNBC on Thursday, predicting that incoming Fed Chair Walsh is not only unlikely to cut interest rates but may even consider raising them. Meanwhile, he remains optimistic about the AI-driven U.S. stock bull market, believing it is in a middle stage with another 1-2 years of gains possible, though it will ultimately face the risk of a sharp correction.
No Hope for Walsh to Cut Rates, Possibly Even a Rate Hike
Regarding the policy direction of the incoming Federal Reserve Chair Walsh, Jones stated unequivocally: "Will he cut rates? Absolutely no way."
Walsh has previously expressed a dovish leaning, with the Fed's benchmark rate currently held in the 3.5%-3.75% range, unchanged since last December. However, his inclination towards easing will face significant resistance from the Federal Open Market Committee (FOMC) – the most recent meeting saw the highest number of dissenting votes in nearly 34 years, with most regional Fed presidents opposing the statement's hint at possible further easing "after three rate cuts by the end of 2025."
Jones believes that even a rate hike could be justified in the current environment: "I would consider raising rates, of course depending on the data, but I would definitely consider it. And I think he will be constrained before the midterm elections."
The current policy backdrop is complex: the labor market is stabilizing, but inflation remains persistently above the Fed's 2% target due to the war in Iran and Trump's tariff policies. According to CME Group's FedWatch tool, futures traders expect the Fed to keep rates unchanged this year, with probabilities for cuts or hikes being roughly equal and both relatively low.
Drawing Parallels to Historical Tech Waves, AI Bull Market Has 1-2 Years Left
Regarding the stock market, Jones is firmly bullish on the AI-driven rally, revealing he has recently increased his holdings in related stocks. He compares the current AI development to two major historical tech revolutions: "I think the emergence of the Claude large model in January this year is equivalent to the founding of Microsoft in 1981; and the current stage of AI proliferation is similar to the release of Windows 95 in 1995 and the acceleration of internet commercialization."
Jones noted that both those technological revolutions ushered in sustained "productivity miracles" lasting 4 to 5.5 years, driving long-term stock market gains. "This current AI bull market has probably run about 50% to 60% of its course. If I had to pick a timeframe, it could last another 1 to 2 years."
In recent years, U.S. stocks have continued hitting new highs driven by AI transformation expectations, with mega-cap tech stocks related to AI infrastructure leading the gains. Chips, cloud computing, and generative AI companies have become magnets for capital, pushing the S&P 500 index to repeated all-time highs.
Analogous to Pre-1999 Dot-com Bubble, U.S. Stocks May Face Sharp Correction Risk in Future
Despite his bullish short-term outlook, Jones draws a parallel between the current market and the prelude to the 1999 dot-com bubble – about a year before it peaked in early 2000. He warns: "Imagine the market going up another 40%, the total market cap to GDP ratio could reach 300% to 350%, and at that point, there will inevitably be a breathtakingly sharp correction."
As a macro trader, Jones said he employs a basket allocation strategy, while also emphasizing: "I always like to look for historical precedents, and this is a very unique period."
Additionally, he issued a warning about the long-term risks of AI: "The government will eventually need to step in with regulation. If left unchecked, artificial intelligence could pose a danger to humanity."
Jones gained fame for successfully predicting and profiting from the 1987 "Black Monday" stock market crash. He is also a co-founder of the non-profit organization Just Capital, which rates U.S. public companies based on social and environmental metrics.
