Billionaire hedge fund manager Paul Tudor Jones believes the markets could plunge 12% as we head for recession amid rising geopolitical tensions that he said could ultimately erupt into a nuclear war.
What To Know: Tuesday morning on CNBC's "Squawk Box," Jones, the founder and chief investment officer of Tudor Investment, issued a bleak outlook on equities given the increasingly challenging environment.
"It’s a really challenging time to want to be an equity investor and in U.S. stocks right now," he said.
Not only is the U.S. in its weakest fiscal position since World War II with debt-to-GDP at 122%, Jones said, but the markets also have to assess the implications of the Israel-Hamas conflict, which Jones suggested has created a recipe for disaster.
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"We now have possibly three theaters where we're going to have geopolitical challenges. We've got the Middle East and Israel, obviously, Ukraine and Russia and then at some point down the road, Taiwan and China," the legendary investor said.
"You have four nuclear powers, three of whom are led by sociopaths, and that would be China, Russia and North Korea. Those leaders have zero responsibility, accountability to anyone but themselves and they have not an ounce of humanity in their bones because they regularly disappear both their friends and their enemies."
Now we have to wait and see if Israel determines Iran, which is led by someone who thinks God is talking to him, is responsible for recent attacks, he said. If that's the case, current geopolitical tensions could escalate into "something terrible," Jones warned.
Jones suggested that he would not be investing in risk assets until he sees how things play out with Israel and Iran.
He told CNBC that we're probably going to go into recession sometime in the first quarter of 2024 and noted the stock market typically declines about 12% right before a recession.
Defense stocks were leading the way on Monday as broader markets fell in response to the attacks over the weekend. The SPDR S&P 500 SPY is bouncing back Tuesday and was last up 1.11% at $437.05, per Benzinga Pro.
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