Written by Norman Isaac Mwambazi

Billionaire investor Paul Tudor predicts a big surge for stocks in the 1st quarter of 2021 after stimulus passes

The United States Congress is currently discussing the second stimulus package to help companies and individuals fill the gap that …

The United States Congress is currently discussing the second stimulus package to help companies and individuals fill the gap that has been caused by the COVID-19 pandemic, following the first package that was paid out in April this year.

With the Democrats and Republicans yet to agree on when to pay out the second stimulus package, billionaire investor Paul Tudor Jones predicts that the stock market could see a big surge at the beginning of 2021 when the next fiscal stimulus is passed in the next six to eight weeks.

Jones told CNBC last week on Thursday that at some point in the first quarter next year, there is going to be a big move to the upside from whatever level that might be. As people get cash from this first stimulus program, they will deploy that in a variety of financial assets so the stock market could see a large gain.

Jones bases his forecast on how investors behaved after receiving the first stimulus check in April, where there was a large amount of stock buying saying, “Robinhood nation went crazy and bought stocks.”

The total stimulus package in the works is expected to be around $1.7 trillion but Jones expects the stock market to be shaken in the last quarter of 2020 before picking up pace in the first quarter of 2021. 

“I could easily see a situation where the market sells off in the year-end, and then you have that typical beginning of the year rally that might ramp all the way through the end of the first quarter certainly the mid-part of the first quarter,” Jones told CNBC.

Democratic Presidential nominee Joe Biden proposed a tax plan where capital gains tax rates and taxes on dividends would be increased from the current 23.8% to 39.6% in the long term for those making more than $1 million a year, making it the biggest hike in capital gains taxes in history.

For this, Jones said that Biden’s tax plan would cause financial assets to “suffer a great deal” over the long run should he win the presidency. He said that there is an inverse relationship between stocks multiples and capital gains tax, however much it is a loose one. 

“I think the Biden tax plan is going to do exactly what it is designed to do, which is to help Main Street, help the average American. And it is going to come at the expense of the 1%, primarily whose wealth is encapsulated in the stock market and financial assets. You are probably going to get a multiple compression, and you’ll probably get some kind of mean reversion.” Jones said.

Paul Tudor Jones II is an American billionaire hedge fund manager, conservationist, and philanthropist.