In the past few weeks, the past few weeks have been rewarded with investors who have purchased DIPs since April 9, given that the S&P 500 and Nasdaq Comprehensive Comprehensive Rate have returned 13% and 16%.
Although data suggests that the U.S. economy is slowing and growing concerns that tariffs may mean stagnation, or worse, a recession is imminent.
However, what happens to the stock next. Major market indices have rebounded to resistance, and some emotional indicators are flickering too much.
Related: Senior analyst sends emergency messages on the S&P 500
The uncertainty about the impact of tariffs on stocks, including a staggering tax on China’s import tax, prompted many of the most influential market observers to share ideas, including legendary billionaire hedge fund manager Paul Tudor Jones.
Jones has been tracking market popularity and decline since the mid-1970s, but he is known for his hedge fund Tudor Investment Corporation. His success in managing money, including predicting the 1987 collapse, led to his inclusion Market Guide Book series.
Jones has managed billions of dollars during bull and bear markets over the past 50 years. Given his trailer, Jones launched a stock market forecast this week, and investors may not want to ignore it.
The Fed's dual mandate goal is low inflation and unemployment. However, these goals are paradoxical and often lead to the Fed lagging behind the curve when formulating monetary policy.
For example, when the Fed raises interest rates, it slows down the economy, leading to layoffs, but slows down inflation. But when it lowers interest rates, it accelerates the economy, increases hiring, but increases inflation.
Related: Analysts Reveal a Surprising FED Rate Lower Forecast
This relationship is easily seen in how monetary policy has affected the economy over the past few years. In 2022, Fed Chairman Jerome Powell began the biggest hawkish interest rate hike since the 1980s, after failing to predict that inflation in 2021 will be short-lived. The decision to delay the rate hike has led to high inflation, which reached 8% in June 2022.
The Fed responded to tightening inflation, which put inflation below 3%. However, these hikes have caused cracks in our job market. The unemployment rate has risen to 4.2% from 3.4% in 2023, and layoffs are rising.
According to Challengers, Gray and Christmas, the company announced a layoff of 497,000 employees in the first quarter. This is the most in the first quarter since the 2009 recession. In April, 105,441 people were fired, a year-on-year increase of 63%.
Weaker work pictures prompted the Fed to change gears, resulting in slowdowns in September, November and December. But these cuts have led to inflation, forcing the Fed to enter off-market, waiting for more data.
The tariffs on fees make the Fed's job even more difficult.
More experts:
The proposed mutual tariffs on Liberation Day are much higher than expected, which has allowed the shock wave to pass through the stock market, forcing many to reset their GDP and earnings growth prospects.
Since then, President Trump has suspended many reciprocal tariffs, but the benchmark tariffs are 10%, 25% tariffs on Canada, Mexico and cars and 145% tariffs on China remain in effect. As a result, supply chains are showing pressure and consumer and business confidence are saving.
The meeting committee's expectations index fell to 12.5 points in April to 54.4, the lowest level since October 2011. Historically, the reading is below 80, which indicates a future recession.
Similarly, the University of Michigan's consumer sentiment survey fell 8% to 52.2 since March, the fourth lowest performance since April 1952. In the survey, inflation expectations for the coming year soared to 6.5% from 5% last month.
Paul Tudor Jones's long history on Wall Street led him to inflation in the 1970s, S&L crisis in the late 1980s and early 1990s, Internet booms and busts, the Great Depression, the Great Depression, the COVID-19 and the 2002 bear markets.
Related: Warren Buffett sends strong message to transactions, tariffs
Saying he saw one or two things in his career might underestimate things. This makes his latest stock market comment even more worrying.
“You have Trump, he has the tariffs, you have the Fed, he has not lowered the tax rate,” said Paul Tudor Jones on CNBC. “This is not good for the stock market.”
Jones concluded, or more bluntly, “We could be a new low.”
But what about the trade agreement? Will those lead to higher stocks? perhaps. However, these deals may have to be big, and it may not be possible given Trump's obvious commitment to his tariff plan.
"Even if Trump allocates China to 50% … or 40% … it's the biggest tax increase since the 1960s," Jones said. "So you can enjoy a 2% to 3% discount."
If Jones' outlook is correct, a major blow to GDP growth could force Trump and the Fed to take market-friendly actions.
"When we are at a new low, hard data will start following, which could create the Fed's action, creating Trump's move," Jones said.
Related: Senior Fund Manager Unveils Dramatic S&P 500 Forecast