Paul Tudor Jones says market reckoning on spending is coming after election: 'We are going to be broke'

Billionaire hedge fund manager Paul Tudor Jones said the U.S. government's fiscal deficit and the increased spending promised by both presidential candidates could force a reckoning in the bond market after the November 2024 election. Speaking to CNBC's Andrew Ross Sorkin on October 22, 2024, Jones said, "We are going to be broke really quickly unless we get serious about dealing with our spending issues."

Jones, founder and chief investment officer of Tudor Investment, said he is worried that government spending could cause a major sell-off in the bond market, spiking interest rates. As a result, he said he plans not to own fixed income and will bet against the longer-dated part of the bond market. He framed the risk as a possible "Minsky moment," referring to a sharp decline in asset prices, in which policymakers acknowledge that current fiscal plans are "fiscally impossible, financially impossible."

According to the Treasury Department, the federal deficit for fiscal 2024 soared above $1.8 trillion, 8% higher than in 2023. The government finances this gap by selling Treasury bonds, and Wall Street traders closely watch the maturity profile and timing of those sales. Rising interest rates over the past three years add to concern, since they raise the annual cost of servicing the debt.

Jones noted that budget deficits grew under both the Trump and Biden administrations and said Trump and Vice President Kamala Harris are "least suited for the job ahead of them" on the budget. He also said he remains concerned about inflation, particularly if Trump wins. Jones said there are several ways to bring spending in line, but they could require significant changes, such as letting Trump's first-term tax cuts expire or making a major reduction in the federal workforce.

Jones founded his hedge fund more than four decades ago and rose to prominence by correctly predicting the stock market crash of 1987.