Paul Tudor Jones: Biden's election, the blue wave, and the resulting stock market surge will have what negative consequences?

Wall Street legendary investor Paul Tudor Jones, who favors Bitcoin as an inflation hedge asset, recently gave an interview to the media, discussing the potential impact on the economy following a decisive victory for the Democratic Party represented by Biden.

Expected Economic Stimulus

House Speaker Nancy Pelosi has indicated progress in economic stimulus discussions with the Treasury Secretary, leading to optimistic market expectations and a slight uptick in the U.S. stock market on the 23rd.

In the final presidential debate, Trump and Biden differed in their approaches to economic stimulus, but both expressed strong support for the next round of economic stimulus.

Paul Tudor Jones believes that the next stimulus package could provide relief to small and medium-sized businesses in the U.S. and potentially drive retail investors to boost the stock market in the first quarter of 2021. He further stated that with Democrats securing a majority in both the House and Senate, known as the "blue wave," there would be more fiscal stimulus to drive the economy.

Long-Term: Significant Losses in Financial Assets

Paul Tudor Jones stated that after an initial stock market surge, the "blue wave" and Biden's high-tax policies could lead to significant losses in financial assets.

Biden plans to increase taxes for individuals earning over $400,000 annually, with higher rates for those making over $1 million. Paul Tudor Jones believes this tax structure is necessary to aid U.S. small businesses and the general public, with the cost borne by the top 1% whose assets are primarily in the stock market and financial assets.

While short-term correlations between Bitcoin and U.S. stocks have decreased, the long-term trend remains highly correlated this year:

Bitcoin Won't Face Inflation Pressure

Paul Tudor Jones believes that government-backed currencies almost always depreciate over time. He stated, "If you think about it from a purchasing power standpoint, if you own cash, in a way you own an asset that's going to be debased by 2% a year... So, you have that, and you have the choice of what you want to own."

People can hedge against this by buying value stores like gold. He further noted that currently, Bitcoin is one of the best inflation hedge options, despite only allocating a single-digit percentage of his assets to it.

Recently, payment giant PayPal announced its foray into cryptocurrency payments, citing financial inclusion as their goal. However, a more immediate objective might be providing a hedge against visible future inflation by holding cryptocurrencies and gaining convenient payment channels, potentially tapping into a significant market.