(Bloomberg) -- Paul Tudor Jones said President Donald Trump is likely to appoint an “uber dovish” Federal Reserve chair to accommodate his growth agenda, contending that Treasury Secretary Scott Bessent would likely be his pick when Jerome Powell’s term ends next year.
Jones, 70, said in an interview with Bloomberg Television Wednesday that two people being floated for the appointment — Bessent and Kevin Warsh, a former member of the Fed Board of Governors — are “fabulous names.” But Trump’s focus on growth and loyalty make Bessent a stand-out candidate, Jones said.
Jones, who founded the $16 billion macro hedge fund Tudor Investment Corp., also said Trump’s signature tax bill poses a threat to stock and bond markets down the line. Jones predicts it will spur rate cuts over the next 12 months.
“The Big, Beautiful Bill is really interesting — the name of it is a genius in branding,” Jones said. “What is the counterfactual to the Big, Beautiful Bill? If you had to balance the budget, it would probably be the Big Beastly Bill.”
If he were in Trump’s shoes, Jones said, “the first thing I would do is I would appoint the most dovish central banker I could find to deliver interest-rate cuts.”
Then, he would push through an austerity package with a tax hike on top earners and broad-based cuts to programs including Social Security, Medicaid and defense spending, Jones said. He would also press to reduce rates to 2.5%, contending there “will be a point when the markets demand it.”
“At some point, the bond market will call B.S. on governments around the world playing chicken with them,” he said.
Trump said last week he will announce successors for Powell, whose term ends May 15, “very soon,” though he didn’t name candidates.
Not Sustainable
Jones said the Trump administration has “normalized” US budget deficits of 6%, which he thinks are not sustainable.
“I am not judging, I am calling balls and strikes,” Jones said. “With that in mind, knowing that we have a whole pricing structure that is not sustainable, it is really hard to invest for the long run.”
He predicted the growing deficit will eventually cause stocks to sink. Until then, the best portfolio for fighting inflation would be a combination of stocks, gold and volatility-adjusted Bitcoin, he said.
One spending proposal Jones endorsed: the so-called Trump accounts, a provision in the tax bill that calls for the federal government to make a one-time contribution to a tax-deferred, low-cost index fund for babies born in the next few years.
“Here I am a budget hawk, and the cranky guy, but that is the best $4 billion that we would ever spend in history,” he said. Jones said he supports the idea of making kids “stakeholders” from an early age and fostering an understanding of entrepreneurship and free markets.
In the wide-ranging interview, Jones said capitalism is “spectacular at maximizing productivity” and also bad at distributing income in a socially beneficial way. Productivity gains since the mid-1980s have overwhelmingly benefitted the wealthy, he said.
(Updates with comments on deficits beginning in paragraph nine.)