- Ray Dalio stated that the US is facing a “perfect storm” consisting of debt, political strife and an overseas conflict.
- Dalio warned that in order to defeat stubborn inflation, the Fed would have the markets and economy hurt.
- The billionaire investor also discussed currencies and China, as well as portfolio advice.
Ray Dalio warns the US of a rare combination, and predicts that the Federal Reserve’s fight against inflation will cause further pain to markets and the economy.
A billionaire investor raised key concerns about the US economy’s huge debt and cash, the raging political conflict between Democrats and Republicans, as well as Russia’s ongoing invasion in Ukraine.
He said, “Those three factors are the perfect storm.” Greenwich Economic ForumTuesday
Dalio claimed that the recent inflation of asset prices and an influx of cheap money has led to an increase in US interest rates, which he called “ridiculously stupid”. He said that the downturn would be extremely unpleasant.
He stated that “The Fed and the Government together gave an immense amount of debts and credit, created giant lurch ahead, and created a Bubble.”
He stated that “they will raise interest rates until there’s enough economic and financial market pain to address that.” “They are putting on the brakes so we’re going backwards.”
Dalio, founder of Bridgewater Associates Recenty, stepped downAs the co-chief investor of the hedge fund, he now serves as a mentor for its bosses. He explained that inflation is only affected by people losing their purchasing power and spending less. Rates must rise enough to decrease demand in the private sector.
The investor forecasted a yearly inflation rate between 4% and 5.5% over the medium term. He suggested that rates should rise from around 3% today to more than 4.5%.
Portfolios, currencies, and China
The US economy’s stronger strength and higher rates has led to the dollar rising to a 20 year high against major currencies. Dalio cautioned against valuing greenback in relation to its competitors.
He stated, “They’re all bad currency.” “They all depreciate in buying power,” he said, referring both to inflation and the growing money supply’s impact on the currency of many countries’ notes or coins.
He also gave some tips for how to navigate the current market. He advised people to invest in what they are most likely to need such as education, food and housing.
He stated that peace countries with strong balance sheets and budget surpluses are good places to spend money. He also pointed out the potential value of emerging technology. He stressed the importance of having diverse portfolios.
He stated, “It takes only one time to knock your out of the game.” “You must survive first.”
Dalio then highlighted the many problems facing China, including a debt crisis that had been allowed to get too deep into the economy.
He criticized the country’s highly leveraged real estate sector and challenged its commitment to free markets. He warned of more disruptions by COVID-19 and noted that there are not enough young people to care about the elderly.
He stated that China faces many problems, and that while the country’s long-term outlook looks bright, it is facing “major issues right now.”
