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

Legendary investor made an estimated $100 million on 1987 crash, now says investors could see 'negative 10-year returns' Laura Grande Tue, September 15, 2026 at 12:15 PM GMT+2 13 min read ^DJI ^GSPC Invest Like The Best podcast Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. In October 1987, while the rest of Wall Street investors were losing their fortunes, Paul Tudor Jones was collecting one. He had spent months studying the parallels between the 1987 and 1929 crash (1), positioned his fund against the market and when the Dow dropped 22% in a single day (2) — still the largest single-session percentage decline in history — his short bets made him an estimated $100 million.

Nearly four decades later, Jones is looking at today's stock market and he's uncomfortable. His warning: Buying the S&P 500 at current valuations could lead to negative 10-year returns. Top Picks Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being one A record 45% of central banks plan to grow gold reserves — and many investors are following suit.

Get your free gold IRA guide from Priority Gold A single line on your car insurance policy could be inflating your premium by up to 30% — here's what to change He says there's no imminent crash, but the current structural setup makes it very hard for U. S. investors to make money over the next decade.

Meaning if you load up on index funds today, you could open your brokerage app in 2036 and find less money than you put in. He laid all of this out on Patrick O'Shaughnessy's Invest Like the Best podcast (3) on April 28. What Jones is talking about Jones runs Tudor Investment, a macro hedge fund founded in 1980.

In the podcast with O'Shaughnessy, he started with the fact that the total U. S. stock market capitalization is currently 252% of GDP, per Jones's own analysis (5).

For context, that figure was 65% in 1929 — before the Great Depression — and 170% in 2000, at the peak of the dot-com bubble. In Jones's words, we are more "over-equitized" than at any other point in American history. Over-equitized means the stock market has grown so large relative to the actual economy that it now drives the economy rather than reflecting it.

Tax revenues, consumer spending and corporate investment decisions now increasingly depend on whether stock prices stay high. The U. S.

has never been more exposed to what happens if they don't. Jones connects this directly to your portfolio. The current S&P 500 price-to-earnings (PE) ratio of 22, he told the podcast, is a level that has historically implied negative 10-year forward returns — which means investors buying the index today, on average, have historically ended up with less money a decade later than they started with, according to data (6).

Story Continues "The stock market's really high and it's going to be really hard to make money from here, I think, with any kind of long-term view," he told O'Shaughnessy (3). "You have to be cognizant of that fact when you think about how you have your money deployed. " But Jones isn't exactly running for the exits Since then, Jones has sounded a little more bullish.

In a May 2026 CNBC interview (4), he said the AI-fueled rally could have another 40% to run and potentially keep going for another year or two. But he also warned that the eventual correction could be "breathtaking. " That may sound like a contradiction, but it isn't.

Jones seems to think there's still money to be made in this rally — even if he believes investors could pay a steep price for today's lofty valuations down the road. And his latest portfolio filing suggests he's putting some money behind that view. How a correction could cascade Jones's concern isn't just about stock prices falling.

It's about what happens downstream when they do and why a correction in today's "over-equitized" economy would hit harder than at any previous point in history. Jones says significant bear markets have historically mean-reverted roughly every 10 years (3), with stock valuations (measured by the P/E ratio) falling back toward the average of the previous 25-30 years. That's a huge deal because if the total stock market is now worth 252% of the U.

S. GDP (7) (all the country's yearly economic output), a 35% plunge wouldn't just shrink portfolios — it would wipe out wealth equal to 80-90% of one full year's U. S.

economy, Jones said. The government then gets slammed from two sides at once. Jones estimates that about 10% of tax revenues come from capital gains, which could fall sharply if people stop selling stocks for profit.

The budget deficit, already running at $1. 8 trillion in 2026 per the Congressional Budget Office (8), would balloon even further. "You can see the budget deficit blowing up," Jones said, "you can see the bond market getting smoked (3).

" A stock market correction can trigger a bond market crisis. A bond market crisis can tighten credit for everyone, decelerate the economy and even drive stocks lower. There's a second pressure Jones flags that most investors miss.

For the past decade, U. S. companies have been net buyers of their own stock.

They snapped up shares and retired them, shrinking supply by about 2% of the total market value each year (about $1 trillion annually) (9), to create steady demand that has pumped these stock prices higher. But Jones says it's ending because a wave of major IPOs, like SpaceX, OpenAI and many other startups, is still unfolding. Instead of companies buying shares back, the market is absorbing hundreds of billions in new supply.

Add in lock-up expirations (where insiders can dump shares 6-18 months post-IPO) and you've got way more supply hitting the market with fewer reliable buyers to catch it. Read More: Vanguard reveals what's coming for U. S.

stocks — and it could be bad news for this group of investors And Tudor is still buying Here's the interesting part: Jones isn't exactly putting his money where his mouth is if that means betting against U. S. stocks altogether.

Tudor Investment boosted its position in the iShares Core S&P 500 ETF (IVV) by about 730% in the second quarter, to roughly 1. 6 million shares worth $1. 2 billion, according to its latest 13F filing (10).

That doesn't necessarily mean Jones has suddenly turned bullish on the market. A 13F only gives us part of the picture and Tudor also had sizable options positions tied to major market ETFs. But the big IVV purchase is worth noting: Jones may be worried about what today's valuations mean for the next decade, while still seeing more upside in the market right now.

What to do with this Jones is not saying to sell everything. He also didn't predict a crash anytime this year. His message is about positioning — being honest with yourself about what you own and what environment you're owning it in.

A few practical implications you should consider are: If you are 100% in U. S. equities through an S&P 500 index fund, you are fully exposed to the valuation risk Jones is describing.

That's not necessarily a problem — index funds still beat most active managers over long periods — but it means your returns over the next decade may look very different from the last decade. And the last decade has been a tough act to follow. As of Sept.

2, 2026, the S&P 500 had delivered a 15. 29% annualized total return over the past 10 years. It was also up 12.

34% so far this year and 19. 53% over the past 12 months (9). Negative 10-year returns would be a very different outcome.

There are other reasons for caution, too. The S&P 500's forward P/E has dropped to about 19. 7 from 22.

2 earlier this year, but it's still above its long-term average. And with the 10-year Treasury yield nearing 5%, bonds are looking a little more attractive, while higher rates put pressure on borrowing costs (11). Still, not everyone is expecting trouble.

Fundstrat's Tom Lee remains bullish on stocks and sees potential for a September rally despite the month's historically weak track record. Diversify with gold Geographic diversification matters more now than it has for some time. International markets (particularly in Europe and parts of Asia) trade at considerably lower valuations than U.

S. equities. You can consider cheap alternatives to overpriced U.

S. stocks, like the Vanguard FTSE Developed Markets ETF (VEA) (13) and iShares MSCI Emerging Markets ETF (EEM) (14),(15), which offer exposure to non-U. S.

developed and emerging markets at lower P/E ratios. Jones himself favors gold and Bitcoin as inflation shields. And amid the ongoing conflict in Iran, which is raising fresh concerns about prolonged inflationary pressures, hedging your portfolio against these risks is more relevant than ever.

Energy markets are already flashing warning signs. The World Bank Group estimates oil and gas prices could jump as much as 24% this year, pushing them to their highest levels since Russia's invasion of Ukraine in 2022, as the effects of the Middle East conflict continue to ripple through global commodity markets (16). Gold has long been considered a go-to safe-haven asset during wartime, largely because its value isn't tied to corporate profits or the performance of a single country's economy.

In fact, last fall Jones and his team lowered his hedge fund's exposure to tech giants like Apple and Alphabet while increasing holdings of the SPDR Gold ETF by 49% (17). One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Priority Gold . Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, thereby combining the tax advantages of an IRA with the protective benefits of investing in gold.

If you opt for Priority Gold's platinum package, you can get free account setup and insured shipping and storage for up to five years. Plus, you can also rollover your existing IRA or 401(k) into a precious metals IRA with Priority Gold — tax and penalty free. And when you make a qualifying purchase with Priority Gold, you can even receive up to $10,000 in precious metals for free.

Hedge with real estate Real estate could also be a viable option. As the cost of building materials, labor and land increases, property values often follow suit, making it a reliable hedge against inflation. Plus, rental income can act as another built-in buffer.

When inflation pushes up the cost of living, rents typically adjust higher as well, especially in high-demand markets. That means landlords can potentially pass some of those rising costs on to tenants, helping protect their cash flow even as everyday expenses climb. If you wish to hedge your portfolio with real estate but don't want to take on the responsibilities of being a landlord, platforms like mogul might be worth considering.

Founded by former Goldman Sachs real estate investors, mogul handpicks the top 1% of single-family rental homes nationwide for you. Their team carefully vets each property, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average yearly return of 18.

8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. With investments typically ranging between $15,000 and $40,000 per property, offerings often sell out in under three hours .

Getting started is a quick and easy process. You can sign up for an account and then browse available properties . Once you verify your information with their team, you can invest like a mogul in just a few clicks.

And if you have more capital on hand, you might consider expanding into high-demand multifamily and industrial markets. Accredited investors can now tap into this opportunity through platforms such as Lightstone DIRECT , which gives accredited investors access to single-asset multifamily and industrial deals. Lightstone DIRECT's direct-to-investor model ensures a high degree of alignment between individual investors and a vertically-integrated, institutional owner-operator — a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.

With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets Lightstone pursues with its own capital, with minimum investments starting at $100,000. Create a balanced portfolio With inflation risks lingering and stock market volatility becoming more frequent, traditional investments may not be enough to deliver smooth, consistent returns. Building a portfolio that can weather those ups and downs isn't always easy to do on your own.

A financial advisor can help crunch the numbers and build a plan that works. But hiring an advisor can be a lifelong commitment, which might make or break your retirement. That's why finding reliable advisors is crucial.

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That's why Advisor. com lets you set up a free initial consultation , with no obligation to hire, to see if they're the right fit for you. Once you've got the right financial advisor in your corner, the next step is getting a clear picture of where your money's actually going.

That starts with the basics — budgeting and tracking your spending. — With files from Godwin Oluponmile. What To Read Next The tax breaks in Trump's 'big beautiful bill' expire after 2028.

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Article sources We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines . Federal Reserve History (1) , (2) ; @patrick_oshag (3) , (5) , ( 7 ); CNBC ( 4 ); Apollo Academy (6) ; Congressional Budget Office (8) ; S&P Dow Jones Indices ( 9 ); 13Foresight ( 10 ); Interactive Brokers (11) ; Reuters ( 12 ); Vanguard (13) ; iShares ( 14 ); GuruFocus ( 15 ); World Bank Group ( 16 ); The Globe and Mail ( 17 ).

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