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Billionaire investor Paul Tudor Jones says inflation is the single biggest threat to financial markets and is 'much worse' than feared

Business Insider logo Business Insider 10/20/2021 (Isabelle Lee)
Paul Tudor Jones, founder and CIO of Tudor Investment Corporation. REUTERS/Eduardo Munoz/File Photo © REUTERS/Eduardo Munoz/File Photo Paul Tudor Jones, founder and CIO of Tudor Investment Corporation. REUTERS/Eduardo Munoz/File Photo

Billionaire investor Paul Tudor Jones on Wednesday revealed what he views as the top threat to society: inflation.

"I think, to me, the number one issue facing Main Street investors is inflation, and it's pretty clear to me that inflation is not transitory," he told CNBC. "It's probably the single biggest threat to, certainly, financial markets and I think to society just in general."

The founder and CIO of Tudor Investment Corporation bucked the longstanding narrative of the Federal Reserve - and other central banks in the world - that inflationary pressures will be short term.

The unprecedented fiscal and monetary stimulus supporting the economy from the depths of a pandemic-induced recession has caused the economy to overheat, Jones said. The Fed has thus far added $4 trillion to its balance sheet and has slashed rates to historic lows while the US Congress has flooded Americans with around $5 trillion worth of stimulus checks.

"Inflation can be much worse than what we fear. We have the demand side of the equation ... and that is $3.5 trillion greater than what it normally would have ... just sitting in liquid deposits," Jones told CNBC.

"They can go into stocks, or crypto, or real state, or be consumed. So that's a huge amount of dry powder just sitting there, waiting to be utilized at some point, which is why inflation is not going to be transitory."

In fact, the consumer price index picked up in September, he noted, as new obstacles, such as supply-chain bottlenecks and labor shortages, keep up inflationary pressure longer.

Despite the gloomy outlook, Jones has observed US stocks are brushing off the this narrative. And amid an inflationary environment, they just might be an investors' best bet, he said.

"Equities are interesting," told CNBC. "Certainly in an inflationary world, they are a much better bet than fixed income."

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