Paul Tudor Jones says a recession is likely and the stock market probably will decline about 12%

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Paul Tudor Jones said Tuesday that aggressive rate hikes could tip the U.S. economy into a recession, and he expects stocks to suffer a double-digit loss before the downturn arrives. “We’re probably going to go into recession sometime in the first quarter of next year, probably because the bond market, simply through supply and demand, is going to deliver more rate hikes because we don’t have a clearing price yet for long-term debt,” Jones said on CNBC’s ” Squawk Box .” “So those rate hikes are probably going to tip us into recession.” In a bid to fight stubbornly high inflation, the Federal Reserve has taken interest rates to the highest level since early 2001, while signaling borrowing costs will stay elevated for longer. Many have grown worried about a recession as the economy feels the lag effects from massive tightening measures undertaken since March 2022. The founder and chief investment officer of Tudor Investment said history shows that risk assets have more room to fall before hitting a bottom ahead of a recession. He said it’s an extremely tough time to be an investor in risk assets amid escalating geopolitical tensions and the dire fiscal position in the U.S. “The stock market, typically, right before a recession declines about 12%. That’s probably going to happen at some point from some level,” Jones said. The S & P 500 is still up nearly 13% this year even after falling 4.9% last month for its worst month of 2023. Jones said there are a few telltale signs in the market that show a looming recession, including gold prices and inverted Treasury yield curve. “I think on a relative basis, look what’s happened to gold. It has clearly been suppressed, and so you know that more likely than not we’re going to go into recession,” Jones said. He added that the inverted yield curve tends to steepen before an imminent recession. The spread between the 2-year and 10-year Treasury yields recently tightened to the smallest gap since May 5.