Paul Tudor Jones expects 2027 to be a tough year for the stock market. He points to rising equity supply from large AI offerings, fading buyback support and a possible reckoning over the U.S. fiscal deficit.
Paul Tudor Jones, founder and chief investment officer of Tudor Investment, warned on CNBC's "Squawk Box" on Tuesday that next year could be a tough one for stocks. According to CNBC: "2027 is going to be really, really challenging for the stock market," he said.
Equity supply turns against the market
Jones said the flow picture for the U.S. stock market is probably the most negative since 2002. Corporate buybacks and mergers and acquisitions have been a tailwind for most of this four-year bull market because they decreased the equity supply, he said.
That tide is now turning, according to Jones. Major offerings are ahead in the AI space from Anthropic and OpenAI, and SpaceX has just finished one. He also said companies will likely add more secondary offerings to raise money for the AI buildout, which could weigh on prices.
Deficit and oil add to the risks
Jones also sees the ballooning fiscal deficit as a danger and thinks the market could force a reckoning. Jones said the question is whether the market is at that tipping point, and he would say 60-40 that it is heading down that path.
Oil, which he is long, is another headwind. He argued that prices could rally another $20 to $25 after the midterms, a scenario the stock market would hate.
A market compared with 1999
His comments come as investors worry that the bull market, now in its fourth year, could run out of steam amid concerns about mounting inflation, higher bond yields and a more hawkish Federal Reserve, CNBC reported.
Jones repeated that the current period is akin to 1999, about a year before the dot-com bubble burst in 2000. He also noted a split between companies benefiting from the AI boom and those that are not.
Source: CNBC
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