In October 1987, while the rest of Wall Street investors were losing their fortunes, Paul Tudor Jones was collecting one. He had spent months studying the parallels between the 1987 and 1929 crash (1), positioned his fund against the market, and when the Dow dropped 22% in a single day (2) — still the largest single-session percentage decline in history — his short bets made him an estimated $100 million.
Nearly four decades later, Jones is looking at today's stock market and he's uncomfortable. His warning: buying the S&P 500 at current valuations could lead to negative 10-year returns.
He says there's no imminent crash, but the current structural setup makes it very hard for U.S. investors to make money over the next decade. Meaning if you load up on index funds today, you could open your brokerage app in 2036 and find less money than you put in.
He laid all of this out on Patrick O'Shaughnessy's Invest Like the Best podcast (3), on April 28.
Jones runs Tudor Investment, a macro hedge fund managing over $100 billion in assets. In the podcast with O'Shaughnessy, he started with the fact that the total U.S. stock market capitalization is currently 252% of GDP, per Jones's own analysis (4). For context, that figure was 65% in 1929 — before the Great Depression — and 170% in 2000, at the peak of the dot-com bubble.
In Jones's words, we are more "over-equitized" than at any other point in American history. Over-equitized means the stock market has grown so large relative to the actual economy that it now drives the economy rather than reflecting it.
Tax revenues, consumer spending, and corporate investment decisions now increasingly depend on whether stock prices stay high. The U.S. has never been more exposed to what happens if they don't.
Jones connects this directly to your portfolio. The current S&P 500 price-to-earnings (PE) ratio of 22, he told the podcast, is a level that has historically implied negative 10-year forward returns — which means investors buying the index today, on average, have historically ended up with less money a decade later than they started with, according to data (5).
"The stock market's really high, and it's going to be really hard to make money from here, I think, with any kind of long-term view," he told O'Shaughnessy (3). "You have to be cognizant of that fact when you think about how you have your money deployed."
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Jones's concern isn't just about stock prices falling. It's about what happens downstream when they do, and why a correction in today's "over-equitized" economy would hit harder than at any previous point in history.
Since 1970, major stock market crashes have hit roughly every decade like clockwork (3). Each time, stock valuations (measured by the P/E ratio) have fallen back toward the average of the previous 25-30 years.
That's a huge deal because the total stock market is now worth 252% of the U.S. GDP (6) (all the country's yearly economic output). A 35% plunge wouldn't just shrink portfolios — it would wipe out wealth equal to 80-90% of one full year's U.S. economy, Jones said.
The government then gets slammed from two sides at once. Capital gains taxes — which provide about 10% of all federal tax revenue — drop to near zero as people stop selling stocks for profit. The budget deficit, already running at $1.9 trillion in 2026 per the Congressional Budget Office (7), would balloon even further. "You can see the budget deficit blowing up," Jones said, "you can see the bond market getting smoked (3)."
A stock market correction can trigger a bond market crisis. A bond market crisis can tighten credit for everyone, decelerate the economy and even drive stocks lower.
There's a second pressure Jones flags that most investors miss. For the past decade, U.S. companies have been net buyers of their own stock. They snapped up shares and retired them, shrinking supply by about 2% of the total market value each year (about $1 trillion annually) (8), to create steady demand that has quietly pumped these stock prices higher.
But Jones says it's ending because a wave of major IPOs, like SpaceX, OpenAI, and many other startups, is coming. Instead of companies buying shares back, the market is absorbing hundreds of billions in new supply. Add in lock-up expirations (where insiders can dump shares 6-18 months post-IPO), and you've got way more supply hitting the market with fewer reliable buyers to catch it.
Jones is not saying to sell everything. He also didn't predict a crash anytime this year. His message is about positioning — being honest with yourself about what you own and what environment you're owning it in.
A few practical implications you should consider are:
If you are 100% in U.S. equities through an S&P 500 index fund, you are fully exposed to the valuation risk Jones is describing. That's not necessarily a problem — index funds still beat most active managers over long periods — but it means your returns over the next decade may look very different from the last decade. The S&P 500 returned an average of roughly 14% annually over the past 10 years (9). Negative 10-year returns would most likely give you a different result from that expectation.
Geographic diversification matters more now than it has in a while. International markets (particularly in Europe and parts of Asia) trade at considerably lower valuations than U.S. equities. You can consider cheap alternatives to overpriced U.S. stocks, like The Vanguard FTSE Developed Markets ETF (VEA) (10) and iShares MSCI Emerging Markets ETF (EEM) (11),(12), that offers exposure to non-U.S. developed and emerging markets at lower P/E ratios.
Jones himself favors gold and Bitcoin as inflation shields. He explained that Bitcoin is "unequivocally the best inflation hedge that there is. More than gold. Because Bitcoin is finite, there's only so much Bitcoin that can be mined."
It is smart to note his view, but don't chase it blindly; speculative bets come with real volatility. The safest play according to Jones is to audit your portfolio: know what you own, why it fits your goals, and don't bank on the last ten year's profits repeating itself.
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Federal Reserve History (1),(2); X (formerly Twitter) (3),(4),(6); Apollo Academy (5); Congressional Budget Office (7); Interactive Brokers (8); Curvo (9); Vanguard (10); iShares (11); GuruFocus (12)
This article originally appeared on Moneywise.com under the title: Legendary investor who made an estimated $100 million on 1987 crash says investors could see 'negative 10-year returns'
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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