Ray Dalio came out with a gloomy prediction for stocks and the economy after a hotter-than-expected inflation print rattled financial markets around the globe this week.
“It looks like interest rates will have to rise a lot (toward the higher end of the 4.5% to 6% range),” the billionaire founder of Bridgewater Associates LP wrote in a LinkedIn article dated Tuesday. “This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it.”
A mere increase in rates to about 4.5% would lead to a nearly 20% plunge in equity prices, he added.
The rate market suggests traders have fully priced in a 75-basis-point hike next week by the Federal Reserve, with a slight chance for a full percentage point move. Traders expect the Fed fund rate to peak at about 4.4% next year, from the current range of 2.25% and 2.5%.
Dalio noted investors may still be too complacent about long-term inflation. While the bond market suggests traders are expecting an average annual inflation rate of 2.6% over the next decade, his “guesstimate” is that the increase will be around 4.5% to 5%. With economic shocks, it may be even “significantly higher,” he added.
Dalio said the U.S. yield curve will be “relatively flat” until there is an “unacceptable negative effect” on the economy.
A deepening inversion of key curve measures — seen by many as a potential harbinger of recession — has helped reinforce a more downbeat view about economic activity among investors.
Investors, speculating that the Fed will tip the economy into recession next year in the fight to curb inflation, already see policy makers easing rates in the later stages of 2023.
The S&P 500 is heading for its biggest annual loss since 2008, while Treasuries have suffered one of their worst beatings in decades.
Meanwhile, Raymond James and Tritonpoint Partners separately welcomed father-son teams, including a breakaway from UBS in Missouri.
Paul Atkins has asked staff to solicit public comment on novel ETFs, pausing the clock on as many as 24 filings linked to the booming event contracts market.
From 401(k)s to retail funds, Deloitte sees private equity and credit crossing into mainstream investing on two fronts at once.
Big-name defections from Morgan Stanley, UBS, and Merrill Lynch headline a busy two weeks of recruiting for the wirehouse.
Markets have always been unpredictable. What has changed is the amount of information investors are trying to process and the growing role advisors play in helping clients avoid emotional decisions
Wellington explores how multi strategy hedge funds may enhance diversification
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
