Billionaire hedge fund manager Paul Tudor Jones says the bond market could force the government to address massive spending and deficits after the election.
“We are going to be broke really quickly unless we get serious about dealing with our spending issues,” Jones said in an interview with CNBC.
He’s worried government spending could cause a big sell-off in the bond market, spiking interest rates. He was referring to a “Minsky moment,” which means dramatic decline in asset prices. He specifically references U.S. debt.
The Treasury Department reported that the federal deficit for the 2024 fiscal year is more than $1.8 trillion, which is an 8% increase from 2023.
The government offsets its fiscal deficit by selling Treasury bonds. But increased interest rates over the past several years drive up the government’s annual cost of the debt and balloons the deficit, which means even more interest costs and higher rates.
Jones noted that former President Donald Trump and President Joe Biden both oversaw increased budget deficits and referred to Trump and Vice President Kamala Harris as “least suited for the job ahead of them” in regard to the budget.
He also said he is still concerned about inflation, particularly if Trump wins.
What investors should do now
Talk to a professional: Jones suggests that stocks and long-term bonds could be hurt if inflation returns and rates rise.
If you’ve got a lot of money in the market, now’s the perfect time to get a second opinion with a free appointment with a professional advisor.
If you’ve got at least $100,000 in investments, check out a free service called SmartAsset. You fill out a short questionnaire and instantly get matched with up to three vetted financial advisors in your area, all legally bound to work in your best interests. Schedule a free appointment, get a second set of expert eyes and leave with greater confidence in your savings strategy.
Diversify your savings with gold: Jones specifically suggested gold as an investment that will shine in the face of higher government deficits.
Keep in mind, though, that not everyone in the gold business is on the up-and-up. Be careful who you deal with.
Preserve Gold is a family-owned company committed to helping investors protect their wealth and retirement with physical precious metals. They offer gold, silver, platinum and palladium coins and bars delivered directly to your home. They promise to beat any competitor’s price and offer fast, free, insured shipping.
Get a real return: Another investment Jones suggests as a hedge against inflation is real estate. Fundrise can get you started. For as little as $10, Fundrise lets you buy into big, commerical properties real estate properties. In effect, you’re a landlord without having to run background checks or serve eviction notices.
While not a guarantee of future results, Fundrise investors have earned an average of 25% within three years; if they held on for five years, the increase was more than 50%.
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