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

Aditi Ganguly Sun, May 10, 2026 at 10:00 AM EDT 10 min read **

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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.

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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 managing over $100 billion in assets. 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 (4). 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 (5).

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."

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.

Since 1970, major stock market crashes have hit roughly every decade like clockwork (3). Each time, stock valuations (measured by the P/E ratio) have fallen back toward the average of the previous 25-30 years.

That's a huge deal because the total stock market is now worth 252% of the U.S. GDP (6) (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. Capital gains taxes — which provide about 10% of all federal tax revenue — drop to near zero as people stop selling stocks for profit. The budget deficit, already running at $1.9 trillion in 2026 per the Congressional Budget Office (7), 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) (8), 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 coming. 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.

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.

The S&P 500 returned an average of roughly 14% annually over the past 10 years (9). Negative 10-year returns would most likely give you a different result from that expectation.

Diversify with gold

Geographic diversification matters more now than it has in a while. 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) (10) and iShares MSCI Emerging Markets ETF (EEM) (11),(12), 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 (13).

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% (14).

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.

That’s why alternative investments are increasingly entering the conversation, especially assets that don’t always move in lock-step with equities.

Masterworks is offering a single investment that combines blue-chip art with other diverse assets, such as gold and bitcoin, which have historically moved independently of equities and of one another.

The assets have relatively low correlation with equities. So when stocks fall, these assets typically don’t follow the same path, which can help balance overall portfolio performance.

By leveraging access to museum-quality artwork alongside other uncorrelated assets, the strategy aims to enhance diversification while still pursuing meaningful appreciation. In fact, this model would have outperformed the S&P 500 by 3.1x from 2017 to 2025.*

Discover how diversifying with this strategy can strengthen your portfolio for the years ahead.

*_Investing involves risk. Past performance is not indicative of future returns. The 3.1x figure reflects a model backtest, not actual fund performance.