Paul Tudor Jones is warning of the most challenging year the US stock market has seen in decades.
The billionaire hedge funder and the founder of Tudor Investment Corporation is sounding the alarm on the stock market outlook heading into 2027. He sees a variety of headwinds pushing against stock prices next year, potentially resulting in one of the most challenging environments for inflows since the bursting of the dot-com bubble, he said in an interview on CNBC on Tuesday.
Jones noted that the short-term outlook for stocks still looks strong. Historically, in midterm years, the market tends to bottom in October before a strong finish into yearend, he said.
“At the same time, if I was thinking for a year from now, 2027 is going to be really, really challenging time for the stock market,” Jones said of the medium-term. “You’ve probably got the most negative flow picture for the US stock market that we’ve had, say, since 2002.”
Jones pointed to supply and demand dynamics for US stocks, which has leaned more heavily on the demand side in recent years due to factors like increased corporate buybacks and mergers and acquisitions.
Going forward, though, stock issuance is expected to surge as more companies go public, insider shares get unlocked for sale, and secondary offerings increase. Altogether, it makes the “most negative” picture for inflows the market has seen since 2009, Jones estimated.
Jones also highlighted worrying parallels the market was flashing to 1999, the year the dot-com bubble was enjoying its final hurrah.
The US market now feels “completely, perfectly bifurcated,” he said, referring to how the AI sector has thrived and propped up the benchmark indexes, though other sectors of the market have fallen amid the recent surge in bond yields and broader worries about the economy. The same bifurcation in stock performance was also seen prior to the dot-com crash, Jones said.
Around 84% of all companies in the index are trading at least 10% below their all-time highs, meaning the majority of large-cap stocks are in correction territory, according to a recent analysis from The Kobeissi Letter.
The US also looks to be in a “two-speed economy,” Jones added, another parallel to the late 90s. More economists have flagged a K-shaped recovery for the US in recent years, the idea that higher-earning Americans are thriving while lower- to middle-income Americans are struggling to keep pace with the cost-of-living.
“For me, it’s just so clear that, again, we’re on this path that could be great short-term, but may not be so great long-term,” Jones said.
“We are literally, exactly like 1999,” he added of the bifurcation.