Key takeaways:
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Paul Tudor Jones expects massive upside from US markets, but notes that widespread retail and institutional participation is required for a market peak.
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US stock market valuations and economic conditions don’t point to an immediate downturn, supporting the thesis of continued speculative momentum.
Billionaire investor Paul Tudor Jones firmly believes that US financial markets are far from a bubble and points to the US government’s growing fiscal crisis as a catalyst for risk-on assets, including Bitcoin (BTC). Tudor’s main thesis relies on loose monetary policies, retail flows and speculation.
US fiscal debt issue favors allocation in risk-on assets, including Bitcoin
In July, US President Donald Trump signed the “One Big Beautiful Bill,” which extended tax cuts and raised the debt ceiling, creating a $2.1 trillion deficit impact by 2029, according to The Congressional Budget Office.
The interest in the US debt is projected to exceed $1 trillion in 12 months for the first time in history, causing analysts to expect a 127% debt-to-GDP ratio for 2026. Such fiscal stress raises doubts about confidence in the US’s ability to repay its debt as investors worry that the government will need to inflate, or otherwise devalue the currency.
Those concerns intensify as 33% of US Treasurys are held by foreign entities. Injecting liquidity and suppressing real yields tend to drive those holders to seek better return opportunities elsewhere, putting downward pressure on demand for Treasurys and on the dollar itself.
Tudor Jones draws similarities with the 1999 period, which marked Nasdaq’s 90% gains in five months that culminated with the “dot-com crash” in 2000. But this time around, conditions are far more favorable. For starters, the US Federal Reserve (Fed) raised interest rates during 1999, initiating the year at 4.75% and entering 2000 at 5.5%, the opposite of what the market expects for the upcoming months.
Another difference comes from a tightening policy that prevailed throughout 1999. The Fed balance sheet contracted to $5.38 trillion by early 2000 from $8.66 trillion the year prior. Today, the script is reversed: the Fed is unlikely to shrink its balance sheet for the next 12 months, especially with signs of softening in the labor market, offering speculative momentum and an extended runway.
Tudor Jones says a speculative frenzy is distant, expects more gains
Tudor expects a “massive rally,” “much more potentially explosive than 1999,” but argues that markets are presently far from a “speculative frenzy.” Tudor added that “it will take more retail buying” and “real money” before a “blow off” top. Tudor Jones is not predicting an immediate downturn, and stock market valuation metrics support this thesis.
According to Yardeni Research data, the S&P 500 forward price-to-earnings multiple sits near 23 times, well below the 25 times peak seen in 2000, implying there is still room for multiple expansion under favorable sentiment.
Tudor expects “speculative exhaustion” to eventually set in, not an abrupt collapse typically associated with bubble bursts. Tudor Jones recommends allocations tilted toward growth stocks, gold, and Bitcoin as a hedge against inflation and fiscal stress.
Bitcoin’s $2.5 trillion market capitalization remains modest relative to gold’s $26 trillion and the S&P 500 at $57 trillion. Thus, even if Bitcoin absorbs less than 3% of the $7.37 trillion sitting in the money market, a $200 billion inflow could meaningfully move the price direction.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.