Legendary investor made an estimated $100 million on 1987 crash, now says investors could see 'negative 10-year returns'

In October 1987, hedge fund manager Paul Tudor Jones made an estimated $100 million as the market plunged 22% on a single day, the largest percentage drop in history. Nearly 40 years later, Jones warns that buying the S&P 500 at current valuations could lead to negative 10-year returns. In a recent podcast, Jones expressed discomfort with today's stock market, stating that its current structure makes it difficult for U.S. investors to generate positive returns over the next decade.

He argues that the S&P 500's price-to-earnings ratio of 22 implies historical negative returns, as it is historically high relative to the size of the economy. Jones believes the current market is "over-equitized," meaning the stock market has grown too large relative to the economy. He warns that a correction could have severe consequences, including a significant impact on government revenue and a potential bond market crisis.

Despite these concerns, Jones remains cautiously optimistic, suggesting that there may still be opportunities for gains in an AI-fueled rally, but warns of a potentially "breathtaking" correction if valuations continue to rise.