Bridgewater, considered to be the world’s top performing hedge fund in both returns as well as consistency, has gotten plenty of attention over the past few years alongside its founder, Ray Dalio.
As one of the few figures who predicted the 2008 financial collapse alongside his stellar track record for predicting economic collapses, many investors look to his opinion on the state of global markets with much anticipation. While some have worried that a recession could be on the horizon in the U.S., Ray Dalio said today that he considers the possibility less likely than it was a year ago.
Ray Dalio downgraded his expectations for a 2020 recession. Previously, the investor figured that it was a 50-50 chance that markets would head for a significant downturn. However, Bridgewater’s founder has reduced this to only a 35 percent chance, citing recent decisions from the Federal Reserve as being his main reason.
In a LinkedIn post titled “Why We’re Less Worried About a Recession Now That Growth Is Plunging,” Ray Dalio went on to say that “Starting about 18 months ago I assessed the risk of a recession before the next presidential election to be over 50% because we at Bridgewater calculated that a) the growth spurt would be temporary and fade and b) the Fed’s policies in response to the growth spurt would drive asset prices and then the economy down.”
However, he said that this opinion changed, acknowledging that the Fed now has the ability to power interest rates by as much as or over 2 percent, as well as implement quantitative easing to prevent a recession if necessary. “For these reasons, while I still expect that there will be a significant slowing of growth in the U.S. and most other countries, I have lowered my odds of a U.S. recession coming before the U.S. presidential election to about 35%.”
While many analysts worry that the potential for a recession seems likely, others look at 2019 in the same way many in 2016 wondered if a recession would take place due to certain indicators. However, much like three years ago in which worries over a potential downturn turned out unfounded, certain “canary in the coal mine” indicators that traders have long looked to remain positive. Commodities prices, specifically copper, is one of those metrics that point to an optimistic 2019 as it’s price continues to rise.
While a full-blown recession might not be on the horizon after all, most still expect that the markets will see a slowdown in growth. However, central banks are in a good position to mitigate this downturn and prevent it from escalating into something far worse.
Bridgewater Company Profile
Bridgewater Associates, LP is an employee owned hedge fund sponsor. The firm provides its services to pension and profit sharing plans, pooled investment vehicles, corporations, state or municipal government entities, foreign governments & supranationals, central banks, public pension funds, university endowments, and charitable foundations.
It launches and manages hedge funds for its clients. The firm invests in the public equity and fixed income markets across the globe. It employs fundamental analysis to create its portfolios. Bridgewater Associates, LP was founded in 1975 and is based in Westport, Connecticut. – Bloomberg