Dalio’s Fear of The Next Downturn Is Likely Understated

The comments below are an edited and abridged synopsis of an article by Lance Roberts

“What scares me the most longer-term is that we have limitations to monetary policy—which is our most valuable tool—at the same time we have greater political and social antagonism.” Ray Dalio, Bridgewater Associates.

Dalio’s Fear of The Next Downturn Is Likely Understated | BullionBuzz

Dalio made the remarks in a panel discussion at the World Economic Forum’s annual meeting in Davos in January, where he reiterated that a limited monetary policy toolbox, rising populist pressures and other issues, including rising global trade tensions, are similar to the backdrop present in the latter part of the Great Depression in the late 1930s.

Before you dismiss Dalio’s view, Bridgewater’s Pure Alpha Strategy Fund posted a gain of 14.6% in 2018, while the average hedge fund dropped 6.7% in 2018 and the S&P 500 lost 4.4%.

The comments come at a time when a brief market correction has turned monetary and fiscal policy concerns on a dime.

Meanwhile, all it took for Fed Chair Jerome Powell to completely abandon any facsimile of independence was a rough December, pressure from Wall Street’s member banks, and a disgruntled White House.

While the markets are celebrating the clear confirmation that the Fed Put is alive and well, it should be remembered that these emergency measures come at a time when we are told the economy is booming.

Roberts discusses the Fed’s limited monetary tool box, and concludes with a paragraph on Dalio’s view, which is likely understated.

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