Tudor Jones says US will 'regret' the tax cut

Key Points
  • Paul Tudor Jones says tax cuts and spending increases are something "we will all look back on and regret."
  • The legendary macro trader blames the Fed for pursuing negative rates at full employment.
  • "I think the recent tax cuts and spending increases are something we will all look back on and regret," Jones says in an interview with Goldman Sachs.
Paul Tudor Jones
Michael Nagle | Bloomberg | Getty Images

Legendary macro trader Paul Tudor Jones has issued caution about Congress' $1.5 trillion tax cut.

"I think the recent tax cuts and spending increases are something we will all look back on and regret," Jones said in an interview with Goldman Sachs sent to the bank's clients in a note Wednesday.

The hedge fund manager, who called the October 1987 crash, didn't blame Republicans or members of Congress for the tax legislation. Instead, Jones laid blame "firmly at the feet of the Fed" for encouraging what he called a "fiscal transgression" of negative interest rates at full employment.

"If real rates had been at their longterm averages, would we have enacted a $1.5 trillion tax cut? My guess is the Congressional Budget Office's scoring of the increased interest burden would have nixed it," said Jones, who is co-chairman and CIO of Tudor Investment.

The GOP tax overhaul, which President Donald Trump signed into law in December, brought the corporate tax rate down to 21 percent from 35 percent.

Jones isn't the only financial titan who has raised concern about the tax cut overheating the economy. Goldman Sachs CEO Lloyd Blankfein said in a February interview that planning to boost spending while cutting taxes isn't something he would have tried.

"It wouldn't have been what I would do. I think it's a very bold thing to kind of throw a little bit more lighter fluid on a fire that was already going," Blankfein said during an interview with Bloomberg Television.

The tax cuts were pushed through with the help of some notable Goldman Sachs alumni, including the bank's former president, Gary Cohn, who is now Trump's top economic advisor, and former Goldman partner and current Treasury Secretary Steven Mnuchin.

"I think it's a risky thing. I probably wouldn't have done it," Blankfein said. "Do I think [it's] crazy? No. Wrong? We'll see."

Jones also raised red flags about financial markets. He predicted rising inflation, and a surge in the U.S. 10-year Treasury yield. In this environment, Jones said he wants to own commodities, hard assets and cash.

"With rates so low, you can't trust asset prices today," Jones said in the Goldman interview. "And if you can't tell by now, I would steer very clear of bonds."

A spokesman for Tudor said the firm has nothing to add beyond what was in the interview text.