Billionaire Paul Singer has a warning for his fellow investors: 1970s-style inflation can happen again, and almost nobody is ready for it.

The hedge fund manager, a frequent critic of U.S. monetary policy, said in an interview on Grant Williams’s podcast that the combination of “trillions and trillions” of dollars in Covid-19 relief spending, wage pressures and rock-bottom interest rates has the potential to shock markets.

“There’s a really good chance of a tremendous surprise, and a surprise in the relatively near future,” said Singer, speaking on the likelihood of consumer prices spiking higher. “Bonds could have a very significant and abrupt and intense price readjustment.”

Bond-market indicators of future inflation have risen sharply over recent months, with 10-year breakeven rates—derived from the gap between yields on inflation-linked and ordinary Treasurys—climbing above 2% to the highest since 2018. That’s up from a low of 0.47% last year at the onset of the pandemic.

Expansionary fiscal policy is helping to drive the change in outlook, even as the Federal Reserve, which holds a meeting next week, has struggled to gin up much inflation in the past decade with its own tools. It’s been promising not to apply the brakes anytime soon—and urging politicians to hit the accelerator with more pandemic stimulus. President Joe Biden’s new administration is poised to oblige, asking Congress for another $1.9 trillion.

Singer, whose Elliott Management Corp. has one of the best track records in the hedge fund industry, said that holding longer-term bonds is “senseless” at current yields.

“No institution can meet their goals by owning those bonds. They’re no longer a hedge against equity portfolios,” he said. “When you buy something with no yield, where you can only make money if the yield goes from zero to -5 or -10, you’re engaged in speculation, you’re not engaged in investing.”

Along with inflation expectations bubbling higher, long-term government bond yields have surged, with the 10-year Treasury yield hovering near 1.09%, up 18 basis points just this year. The 30-year yield is up about 20 basis points to 1.85%.

“I’m not talking about to 15%, but a price readjustment to yields of three or four for the 30-year or the 10-year in America would cause quite a ruckus,” he said.

Since opening in 1977, Elliott—which invests across numerous strategies—has posted just two losing years and annualized gains of about 13%. The fund gained 12.7% in 2020, beating industry peers.

Singer added that the worst trade he’s ever put on was in 2008, buying Japanese inflation-linked bonds against non-inflation-linked bonds. He put the trade on at an implied deflation rate of 2.5% per year.

At the bottom, after Singer had “lost more money than I thought I could possibly lose in any trade,” the notes had an implied deflation rate of 4.5%. The trade eventually swung back, he said.