Kyle Bass, a hedge fund manager who rose to fame by betting against subprime mortgages in the run up to the 2008 financial crisis, says the market could get rocky soon, perhaps as early as next year.

The problem: Bass says the U.S. economy is headed toward a “stagflationary environment”—a combination of higher prices, an overall sluggish economy, and rising unemployment—ingredients that have been bad for markets in the past—the hedge fund manager told CNBC Wednesday.

Investors will have a hard time generating positive returns over the next few years as a result, Bass said.

Despite an initially tense start to this year with the oil glut and a dramatic selloff, markets have largely rebounded. The S&P 500 reached an all-time high earlier this year, while brent crude, still well below its peak, has risen to $52.56 from below $30 in January. Wages have been also been rising slowly in 2016.

But to Bass, that rise in wages seems like a warning sign since prices are up, yet corporate profits are down. GDP growth has been slow, rising just 1.1% in the first half of the year.

 

“So you have wages up, you have real estate rent moving up, and now you have commodities bouncing,” Bass said. “So 2017 is going to be a year of increasing inflation, but economic growth lagging.”

Best way for investors to invest in such an environment, says the Hayman Capital Management founder: Stay away from longer-term bonds, which tend to lose the most when interest rates and inflation rises.

That said, the Fed released its Beige Book with a “mostly positive” outlook on the U.S. economy on Wednesday. It noted that the job market was tight in some areas of the U.S. Dallas and San Francisco had a shortage of workers.

Bass also weighed in on this year’s unusual election cycle to anchor Andrew Ross Sorkin, saying, “Trump’s a circus clown and Hillary is the only thing we’ve got. So, you know, I think you have to vote for Hillary.”