What Is Paul Tudor Jones Buying Now?

Recently, billionaire investor Paul Tudor Jones appeared in an interview on CNBC’s Squawk Box to talk about his thoughts on the American economy and investment landscape.

Tudor Jones offered a bleak view, stating his belief that higher inflation was becoming a virtual inevitability.

He also explained the moves he was making in his fund’s portfolio to hedge against this eventuality. Why does Paul Tudor Jones see higher inflation coming, and what is he buying to protect his fund?

Why Is Jones Betting on Higher Inflation?

Simply put, Paul Tudor Jones believes that a victory for either candidate in the upcoming election would result in additional deficit spending and a ballooning national debt.

With neither Kamala Harris nor Donald Trump seeming to present any plan for reducing deficits, America’s debt obligations are likely to keep rising well into the future. Eventually, Tudor Jones reasons, an extremely high debt-to-GDP ratio will gradually put ever more inflationary pressure on the American economy.

In Trump’s case, the inflationary effects could be even more immediate due to his protectionist tariff plans. Like many investors, Jones has rebalanced his portfolio on the assumption that Trump’s chances of victory appear to be rising. In Tudor Jones’ view, though, both candidates will be negative for the US economy and inflation in the long run.

Independent research seems to strongly confirm Jones’ views on the trajectory of the debt under either Harris or Trump. After accounting for the effects of stronger or slower growth, projections created by the Wharton School of Business suggest that both candidates’ plans would ultimately add to the national debt.

In Trump’s case, the net deficit would be $4.1 trillion higher over the next 10 years. Harris performs somewhat less poorly, adding $2.0 trillion over the same period.

What Is Paul Tudor Jones Buying Now?

Paul Tudor Jones is buying a basket of gold, bitcoin, commodities and the NASDAQ to hedge against inflation.

Given his expectations of higher inflation under either future administration, it’s no surprise that Jones is buying gold. The precious metal has long been viewed as a hedge against inflation, a fact that accounts for much of its investment appeal.

It should be noted that some disagree with this view and believe gold is more tethered to a lack of confidence in government than inflation per se.

Regardless, gold is seeing strong demand pressure that may very well make it a decent investment beyond inflation. Even after a slowdown in Q2, central bank gold buying activity worldwide remained 6% higher than the year-ago quarter at about 183 tons.

The first half of this year saw record purchases, indicating that nations around the world are stocking up on gold as a safeguard against instability.

As with many other areas of the economy, investment in AI could also put upward pressure on gold prices. The high-capacity chips used to support AI’s computational needs use small amounts of gold, but the surging demand for them could add up.

While AI is unlikely to trigger a gold boom on its own, enthusiasm for the next generation of computing power may keep gold’s industrial demand rising as more and more chips are produced.

Bitcoin

A somewhat more surprising approach to hedging inflation in Jones’ portfolio is his buying of Bitcoin. Bitcoin was long seen as an inflation hedge similar to gold, but the cryptocurrency largely failed to live up to this promise when inflation began to rise in 2022.

Jones’ bullishness on Bitcoin, however, could have many layers to it. To begin with, recent history has suggested that Bitcoin prices rise significantly in response to lower interest rates.

As the billionaire stated in the interview, the long-term response to out-of-control debt would likely involve both steep tax hikes and slashing interest rates to their lowest manageable levels. Bitcoin may, therefore, benefit from a program of prolonged rate cutting.

Bitcoin may also be one of the few legitimate economic beneficiaries of this election due to both candidates’ gradual warming to the cryptocurrency market. Whoever wins, it’s likely that the incoming administration will be more favorable to crypto than past administrations have been. While Harris is likely to regulate cryptocurrency more so than Trump, both seem willing to accept that digital currencies have a place in the modern financial ecosystem.

NASDAQ 100 Stocks

Much like Bitcoin, the stocks that make up the NASDAQ 100 index tend to respond positively to lower interest rates. This is because the NASDAQ is largely made up of growth stocks, including major names like Microsoft, NVIDIA and Apple.

These stocks generally rise markedly when interest rates are low, as the value of long-term future growth increases when it is calculated against a lower discount rate.

Beyond the response of growth stocks to interest rate movements, there are many reasons to be bullish on the NASDAQ at the moment.

While AI hype may be inflating share prices, tech companies have seen strong earnings growth that has also helped support higher prices.

This rise in profitability is also starting to appear outside the technology sector, suggesting that owning a broad cross-section of stocks could be a good long-term strategy even if inflation begins to rise again.

As an index made up of mostly large, dominant companies, the NASDAQ also has some built-in advantages. Unlike the S&P 500, the NASDAQ doesn’t include financial companies. This limits the risk of financial crises.

Additionally, large, dominant businesses tend to have pricing power, allowing them to raise prices to some degree without seeing weakened demand.

Finally, the NASDAQ index as a whole offers a modest 0.8% dividend yield. Though this is small, dividends play a crucial role in bolstering overall returns during economically volatile periods. With large tech companies increasingly using dividends to return cash to shareholders, it’s also possible that the yield could rise in the coming years.

Commodities

Jones revealed that commodities were also part of his inflation hedge strategy. As with gold, commodities tend to be viewed as good safe havens from inflation. This is because commodities are typically essential materials that can rise alongside prices in general. The more demand exists within an economy, the more commodities will be required. Therefore, commodities tend to keep pace with inflation reasonably well.

It’s worth noting that there can be exceptions. In Jones’ view of an eventual debt crisis accompanied by high taxes, for example, consumer spending would likely be weakened and reduce demand for certain commodities.

Likewise, some commodities track economic activity and respond to ups and downs in macroeconomic growth. The most prominent of these is oil, which is notorious for falling as energy demand slumps.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.