Paul Tudor Jones calls bitcoin the 'best inflation hedge,' warns of overvalued stocks

It will be "really hard to make money" in stocks over the next decade, said the billionaire investor, noting that the S&P 500's valuation reminds him of the 2000 dot-com bubble.

What to know:

• Paul Tudor Jones said bitcoin, with its fixed supply, is a stronger hedge against inflation than gold, especially during periods of heavy monetary and fiscal stimulus.
• U.S. equities look overvalued, Jones warned, arguing that current S&P 500 valuations imply a negative 10-year forward return.
• Stock market capitalization relative to GDP is near historic extremes like the dotcom bubble, he noted, raising the risk that a major market correction could worsen the federal budget deficit and roil the bond market through collapsing capital-gains tax revenues.

Billionaire investor Paul Tudor Jones said bitcoin BTC$76,367.24 stands out as the strongest hedge against inflation, citing its fixed supply as a key advantage over traditional assets like gold.

"Bitcoin is unequivocally the best inflation hedge that there is — more than gold," Jones said in an interview with Invest Like the Best podcast published Tuesday. He pointed to the largest crypto's capped supply. Unlike gold, whose supply increases each year, bitcoin has a hard limit on the number of coins that can be created, making it scarcer by design, he said.

Jones framed bitcoin’s appeal through the lens of past market cycles. During periods of aggressive monetary and fiscal stimulus, such as after the March 2020 pandemic crash, he said inflation trades tend to emerge as central banks inject liquidity into the system.

"When you saw all the interventions… you just knew that the inflation trades were going to take off," he said, adding that bitcoin was the most compelling opportunity at the time.

His bullish view on bitcoin contrasts with a more cautious stance on equities. Jones warned that stock markets are stretched, with valuations that historically point to weak future returns.

At the same time, a wave of upcoming initial public offerings — such as SpaceX and artificial intelligence firms like OpenAI and Anthropic — and reduced share buybacks could increase equity supply, putting additional pressure on prices.

"If you buy the S&P at this current valuation, the 10-year forward returns [are] negative," he said. "It’s going to be really hard to make money from here."

While he stopped short of calling the current environment a full-blown bubble, he noted that the ratio of U.S. stock market capitalization to GDP remains near historic extremes, echoing levels seen before major downturns such as the dotcom bubble.

"In 1929 we were, I think at the top, at 65% [stock market capitalization to GDP] and then in '87 we got to about 85%-90%, in 2000 we got 270%," he noted.

"And now we're at 252%, so you can just imagine," he said. "We're clearly so leveraged in equities in this country."

Because of that, a major stock market correction may have broader ramifications on the economy, government budget deficit and the bond market, according to Jones.

"10% of our tax revenues are capital gains. They go to zero," he said. "So you can see the budget deficit blowing up. You see the bond market getting smoked."

You can see this kind of negative self-reinforcing effect," he concluded. "It's troubling."

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