Billionaire investor says the Fed is done raising rates, risk assets may benefit
Billionaire investor and hedge fund manager Paul Tudor Jones thinks that the United States Federal Reserve (Fed) is done raising interest rates. In his assessment, this could support stock prices.
Stock prices may recover by end year
In an interview with CNBC’s Squawk Box on May 15, Jones remains optimistic, saying the central bank is “done” with raising interest rates. A pause in rate rises could be good for so-called “risk” assets, like stocks and cryptos.
After taking a beating stock prices could recover by the close of 2023. Still, he is not rampantly bullish but expects a “slow grind”.
Specifically, Jones said inflation readings have been declining for the past 12 months. Inflation peaked at 9% in June 2022 and has since roughly halved, dropping to 4.9% in April 2023.
Whether the Fed will stop tightening is an unknown. If the Fed slashes rates in the months ahead, it could pump stock prices, spilling over to cryptocurrencies like bitcoin (BTC).
However, judging from previous interventions, BTC prices are increasingly sensitive to macroeconomic factors, mainly interest rates and inflation readings.
Therefore, if inflation continues to fall and the Fed begins slashing rates, reverting to an accommodative stance, the price of risk assets may rise.
Will bitcoin and crypto prices find support?
In an accommodative monetary environment, there are more funds in circulation that can be channeled to riskier assets, including BTC.
With the Fed tightening, several banks have been pushed to the wall, blaming the current state of monetary policy for their woes. Silicon Valley Bank (SVB) had a bank run and collapsed in March.
Many pundits insist that Fed’s decision to increase rates is pushing banks to the corner, worsening the financial crisis in the United States.