Paul Tudor Jones warns 2027 could be challenging for stocks

Investing.com -- Hedge fund manager Paul Tudor Jones said Tuesday that 2027 could present difficulties for the stock market due to increased equity supply from major technology initial public offerings and concerns about the U.S. fiscal deficit.

"2027 is going to be really, really challenging for the stock market," Jones said on CNBC's "Squawk Box" on Tuesday. "You've probably got the most negative flow picture for the U.S. stock market that we've had, say, since 2002."

The founder and chief investment officer of Tudor Investment said corporate buybacks and mergers and acquisitions have supported the stock market during the current four-year bull market by reducing equity supply.

Jones said this trend is reversing with major offerings planned in the artificial intelligence sector from Anthropic and OpenAI, following a recent offering from SpaceX. He expects more secondary offerings from companies seeking to fund AI infrastructure development, which will increase equity supply and could pressure prices.

Jones compared the current market environment to 1999, roughly one year before the dot-com bubble burst in 2000. He pointed to the division in the market between companies benefiting from the AI boom and those that are not.

The hedge fund manager also cited the growing fiscal deficit as a risk for the stock market.

"We're never going to fix these deficits until the market makes us to. It's going to be just like 2008 and TARP [Troubled Asset Relief Program]. So that's the reality. No politician is going to voluntarily raise taxes or cut spending. They're going to be forced to," he said.

"And the only question is, are we now at that tipping point where the market's about to do that? And if you put a gun to my head, I'd say 60-40, we're down that path," he continued.

Jones, who said he is long oil, identified rising oil prices as another potential headwind for the market. He said prices could increase another $20 to $25 after the midterms, which the stock market will "hate" if it occurs.

"I'll be short the whole year. There just — there's little value," Jones said. "You had all this issuance, all these IPOs in '98 and '99, and really 2000, 2001, 2002. Those were the easiest years to be short because you kept having these unlocks that just kept adding supply to the market."

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