May’s market oscillations certainly gave investors a thrilling ride on the volatility roller coaster and this is exactly what hedge fund manager and philanthropist Paul Tudor Jones saw coming as early as last year. Now, Jones has the prescience to forecast rate cuts instituted by the Federal Reserve.
The investing prowess of Jones was on display as he was able to forecast May’s volatility.
“I think we’re going to see a lot more of what we just saw, which is a lot more volatility,” Jones told CNBC’s Andrew Ross Sorkin during the fourth-quarter volatility in 2018. “It’s really easy to say ‘I’m really bullish’ or ‘I’m really bearish.’ I kind of see a two-sided market.”
“I think in the next year it will be, from where we are today, … at least 10 percent down and 10 percent up; maybe 15 percent either way from where we are right now,” Jones added.
Now that a U.S.-China trade deal is left in limbo, it leaves investors looking for the next trigger event to save the markets. With the central bank keeping rates steady thus far in 2019, the next move investors are hoping for is a rate cut, especially if the Fed is sensing a slowdown given the latest economic data.
The Labor Department revealed that only 75,000 jobs were created in May, which fell below expectations and could be a sign that the U.S. economy could be on the verge of a slowdown. Nonetheless, the unemployment rate remained at a generational low of 3.6 percent.
With a central bank dependent on economic data, such as employment figures, it will be interesting to see just how much it will influence their next interest rate policy move. The capital markets are already pricing in a rate cut given the rise in U.S. equities the past week.
“I didn’t think we’d have a first cut in 2019,” Jones said. “I don’t think we would have had that had we not gotten into this tariff battle, and so it has accelerated everything.”
“The tariffs are a very material event,” Jones added. “We haven’t had any experience in modern times with them. So you have to readjust the entire outlook.”
How does Jones recommend playing the rate cut? A steady diet of bets on falling interest rates and rising gold could do the trick.
For the latter, investors can look at exchange-traded funds (ETFs) like the SPDR Gold MiniShares (NYSEArca: GLDM) and SPDR Gold Shares (NYSEArca: GLD). Adding precious metals to a portfolio certainly speaks to the diversification benefits of gold, among other things.
For more market trends, visit ETF Trends.