Zinger Key Points
- Jones noted that rising inflation and low real rates favor assets like Bitcoin and gold over bonds or cash.
- Despite risks, he includes equities in the mix, though warned they would underperform during potential bond market instability.
- Get access to the leaderboards pointing to tomorrow’s biggest stock movers.
Paul Tudor Jones on Wednesday emphasized that the United States is on a long-term trajectory of high budget deficits and constrained fiscal space, and the best investment strategy to withstand this environment centers around a diversified portfolio made up of Bitcoin, gold and equities.
"What would an ideal portfolio be in something like that?" Jones said in an interview with Bloomberg.
"What has worked so far has been some combination of stocks… probably gold. Vol[atility] adjusted Bitcoin gold stocks. That's probably your best portfolio to fight inflation vol[atility] adjusted."
Jones explained that the allocation should reflect each asset’s risk profile, particularly Bitcoin's volatility.
"The vol[atility] of Bitcoin is obviously five times that of gold," he said, adding that the construction of the portfolio must take that into account.
The comments were made in the context of a broader discussion about the U.S. fiscal outlook, where Jones argued that continued deficit spending, normalized under successive administrations, makes it highly likely that future policymakers will opt for monetary policy measures that suppress real interest rates.
"We are fiscally constrained and we're going to have budget deficits of 6 percent plus as far as the eye can see," Jones said. "One of the major offsets if I was the president would be to lower my interest rate costs by appointing a Fed chair who is as dovish as could possibly be."
He added that running negative real rates is historically consistent with how governments have dealt with high debt burdens.
"That's the playbook when you're 100 percent debt to GDP and you're fiscally constrained," he said. "You can see it happening in Japan right now."
As such, Jones said he expects U.S. interest rates to fall significantly within the next 12 months.
Also Read: Crypto Payments Gain Ground, But Travel Industry Adoption Remains Limited
"Twelve months from now, rates are going to drop precipitously with a new Fed chair," he said, referencing President Donald Trump‘s statements advocating a 100-basis-point cut.
The fund manager argued that this anticipated policy environment, low real interest rates, inflation running above target, and continued deficit expansion, makes traditional fixed income unattractive.
Instead, assets with a historical track record of holding value during inflationary periods become more compelling.
Jones reiterated his past support for Bitcoin, which he first publicly backed in 2020 as a hedge against inflation. "If I'm a policymaker, I'm going to run really low real rates. I'm going to have inflation running hot and I'm going to tax the American consumer."
Comparing this to Japan's current economic strategy, Jones noted, "That's exactly what Japan, who's the most fiscally constrained in the world, is doing. And it works… until the population throws you out because you let inflation get too hot."
While stocks, in his view, "won't do great" in the event of a sharp fiscal reckoning or bond market shock, Jones still includes equities in his inflation hedge mix, albeit with caution.
"The biggest threat to the stock market has been our fiscal profligacy… something like the big beautiful bill," he said, alluding to the cumulative impact of aggressive spending proposals.
Read Next:
Image: Shutterstock
Edge Rankings
Price Trend
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
