(Hegnar.no/Dagbladet): – From the point of view of the market, it will be very interesting. There are likely to be some very intimidating moments in the markets.
The words belong to American billionaire Paul Tudor Jones. He is the manager of the hedge fund Tudor Investment, which is about seven billion dollars, or 59 billion dollars.
Speaking on Thursday at the Greenwich Economic Forum in Connecticut, the United States, his message was that stocks and bonds are overpriced, Marketwatch writes.
See the flashing warning lights
There is every reason to hear what Jones says:
The billionaire is known to anticipate major macroeconomic events in the past. His biggest guess, he made a lot of money when he predicted the stock market crash in 1987, after Marketwatch.
In just one day, the Dow Jones Index fell 23%, which is the largest stock market drop in percentage for the all-time index.
Now he sees the warning lights blinking again.
"This is going to be a very challenging time for policymakers. Global debt to GDP is on a new all-time high," Jones says.
– Higher risk
He is supported by Harald Magnus Andreassen, chief economist at Sparebank 1 Markets.
"I think he is sure there is more risk and risk than many years ago," Andreassen told Dagbladet.
He does not find this so strange after a 10-year global economic recovery and unemployment in rich countries that have not been lower since 1980.
"So stock prices will be high," says Andreassen.
However, he would like to nuance the image:
"We tend to see more signs that it's going bad before it sniffs the stock market.
Among the things that still count positively in the global economy are the families that have paid off debts – although Norway is an exception, along with Sweden, Canada and Australia.
The trade wars that President Trump started draws a negative direction.
"It's not destructive today, but it creates uncertainty," says Andreassen.
– Coming in two years.
He believes that in the long run there will be a bigger international drop in the stock markets and that will also hit Oslo Børs.
"When we have a global setback, the Oslo Stock Exchange is always exposed," says Andreassen.
However, he does not think the backbone will come through yet, but he will be surprised if that does not happen in two years.
"Oslo Børs are expensive, but they tend to be more expensive before things go wrong," says Andreassen.
If there is already a stock drop, he believes it will be below 50%.
"How does the man on the street see that?"
– You can take the stock fund you own and split it in two. But to halve today's levels, you have to be very angry with the global economy, "says Harald Magnus Andreassen.
Because Paul Tudor Jones is waiting for troubled times, due to the rise in interest rates and tax cuts of the Trump administration, he has his wallet tested by stress.
At the Greenwich Economic Forum on Thursday, Tudor said the tax cuts of the Trump administration late last year could hurt investors in the long run.
He felt that this would leave the market overheated, and this again forced the central bank to raise its interest rate.
"It's clear that the tax cuts and the economic activity they caused led the Fed to raise interest rates," Jones said.
– Tax relief was promised before the central bank began raising interest rates, and before Trump said he would become president. The interest rate was zero. Do you really think we would have a fiscal restraint if we knew where the interest would be? I doubt that, Jones continued.
The US central bank has raised its benchmark interest rate three times this year, and is expected to rise before the year's turn. The increase in interest rates in a short period of time has occasionally worried investors as it makes it more expensive for companies to borrow money as well as finance repurchase and expansion.
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