Legendary Investor: Wosh "Absolutely Impossible" to Cut Interest Rates

Billionaire hedge fund manager Paul Tudor Jones made a major statement on Thursday in an interview with CNBC, saying that the incoming Federal Reserve Chair Jerome Powell will not cut interest rates and may even consider raising them; at the same time, he remains optimistic about an AI-driven bull market in U.S. stocks, believing the current rally is in a mid-term stage with 1-2 years of upside, but ultimately facing the risk of a sharp correction.

NO RATE CUT EXPECTED, POSSIBLE RATE HIKES

Regarding Powell’s policy stance as he prepares to take over as Fed Chair, Jones explicitly stated: “Will he cut rates? Absolutely not.”

Powell has previously expressed a leaning toward rate cuts, and the Federal Reserve’s benchmark interest rate has remained at 3.5%-3.75% since December last year without adjustment. However, his dovish intentions will face significant resistance from the Federal Open Market Committee (FOMC)—the most dissenting votes in nearly 34 years were seen at the latest meeting, with most regional Fed presidents hinting in post-meeting statements that “after three rate cuts by the end of 2025, further easing may be possible.”

Jones believes that even in the current environment, there are reasons to consider raising rates: “I would consider a rate hike, of course depending on the data, but I would definitely consider it. And I think he will be constrained before the midterm elections.”

The current policy environment is complex: the labor market is stabilizing, but ongoing inflation above the Fed’s 2% target is driven by factors such as the Iran conflict and Trump’s tariff policies. According to CME Group’s FedWatch tool, futures traders expect the Fed to keep rates unchanged this year, with both rate hikes and cuts having roughly equal but low probabilities.

AI Bull Market Still Has 1-2 Years of Upside, Compared to Major Tech Revolutions

In the stock market, Jones remains firmly optimistic about an AI-driven bull run, revealing that he has recently increased holdings in related stocks. He compares the current AI development to two major technological revolutions in history: “I see the emergence of the Claude large model in January this year as analogous to the founding of Microsoft in 1981; and the current phase of AI adoption is similar to the release of Windows 95 in 1995 and the acceleration of internet commercialization.”

Jones points out that both of those technological revolutions triggered sustained “productivity miracles” lasting 4 to 5.5 years, driving long-term stock market growth. “Currently, this AI bull market has completed about 50% to 60% of its run, and if I had to pick a timeframe, it could last another 1-2 years.”

In recent years, U.S. stocks have continued to hit new highs driven by expectations of AI transformation, with large tech stocks related to AI infrastructure leading the rally. Chips, cloud computing, and generative AI companies have become hot investment targets, and the S&P 500 has repeatedly reached record highs.

Similar to the Dot-com Bubble Before 1999, U.S. Stocks May Face Sharp Corrections

Despite optimism about the short-term outlook, Jones compares the current market to the period before the 1999 internet bubble—about a year before the peak in early 2000. He warns: “Imagine the stock market rises another 40%, and the total market cap of U.S. stocks reaches 300% to 350% of GDP, which would inevitably lead to a suffocating and significant correction.”

As a macro trader, Jones says he employs a diversified portfolio strategy, emphasizing: “I always like to look for historical precedents. This is a very special period.”

Additionally, he issues a long-term warning about AI risks: “The government will eventually need to intervene with regulation. If left unchecked, artificial intelligence could pose a danger to humanity.”

Jones gained fame for successfully predicting and profiting from the 1987 “Black Monday” stock market crash, and is also a co-founder of the nonprofit organization Just Capital, which rates publicly listed U.S. companies based on social and environmental metrics.