Ray Dalio: Gold and Riskier Assets Could Become Attractive
Ray Dalio’s expected return relative to risk is going to be poor in the foreseeable future, and he has identified two investment avenues that he believes could become more attractive.
Dalio suggests that we may see non-financial storeholds of wealth gain popularity. More money may flow into assets such as gold, based on a low return on bonds and investors’ desire for safety. Investors may find gold more attractive than holding long-duration bonds, because a lot of these are moving to negative yield, and currency volatility has a direct bearing on the return from these bonds.
Riskier assets may become more prominent than bonds and cash. Investors should bear in mind that, although riskier investments may not be cheap, the risk they carry may offer a commensurate return. We may see more purchases of riskier assets going forward.
Riskier assets could include emerging market equity or bonds, or high-yield or junk debt. A look at the performance of these asset classes and categories gives a fair idea of investor preferences so far this year. Emerging market equity has had the best market performance, with a 14.5% year-to-date return as of October 17, followed by emerging market bonds at 9.3%, high-yield or junk debt at over 7%, and the US bond market, which has returned just 3.3% so far this year.