The S&P 500 Index (SP: .INX) is in for a 'slow grind' higher as the United States Federal Reserve ceases rate hikes from here, tips billionaire hedge fund manager Paul Tudor Jones.
It's a bold prediction, given many analysts fear a recession may be coming in the US.
And as we all know, when the S&P 500 sneezes, the ASX All Ords catches a cold.
Why will the Fed stop raising interest rates?
On CNBC's Squawk Box, Tudor Jones said he thought the US Federal Reserve "could probably declare victory now because if you look at CPI, it's been declining 12 straight months. … that's never happened before in history."
The Fed has been raising interest rates to fight inflation since March 2022.
Australia's Reserve Bank began its own rate-hiking cycle in May 2022.
The difference is the US Fed has raised interest rates at typically higher increments than the RBA, particularly early into its rate-hiking campaign.
The Fed moved the funds rate up in 0.75% increments several times.
The Fed funds rate now has a target range of 5% to 5.25%, which is the highest level since August 2007. This is much higher than Australia's current cash rate of 3.85%.
The rate hikes in the US appear to have done the job, as Tudor Jones points out.
The consumer price index has fallen from a peak of about 9% in June 2022 to 4.9% in April.
What's next for the S&P 500?
Tudor Jones said:
Equity prices … I think they're going to continue to go up this year.
I'm not rampantly bullish because I think it'll be a slow grind.
He reckons the S&P 500 will go higher because "the financial cycle drives so much of the business cycle".
US vs Aussie equities in 2023
The S&P 500 is up 8.2% in the year to date and up 3.2% over the past 12 months.
By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is up 4.3% in the year to date and up 1.5% over the past 12 months.
The ASX All Ords is trading down 0.23% on Tuesday.
