Dalio: No Repeat of 2008 Crisis Looming, and 'I Am Not Bearish on Stocks'

Mar 3 2016 | 8:20pm ET

Bridgewater founder Ray Dalio believes investors should expect low returns and volatile financial markets, but he does not anticipate a repeat of the 2008-2009 global financial crisis.

Dalio, whose Bridgewater Associates is the largest hedge fund in the world, made the comments during a Bloomberg interview from an industry conference. “I’m not bearish on stocks,” the billionaire said, adding that the cardinal distinction about 2008 was that it was a debt crisis. 

Global markets have been clawing their way back upwards over the last few weeks following a disastrous start to the new year. Nonetheless, opinions are sharply divided whether the rallies are just temporary upticks in larger bear trends or the early stages of a reversal. 

Dalio said that despite a range of asymmetric risks, global equity markets should return around 4% over the longer term as risk premiums return, and suggested investors focus on balanced portfolios hedged with 5-10% in gold. 

The Fed could hike interest rates another 25 basis points, Dalio noted, but characterized such a move as a "serious mistake." 

“The next big move I believe will have to be toward quantitative easing, rather than a big tightening,” he said in the interview. The travails faced by global markets over the past several months came as a surprise to the Fed, Dalio believes, because the FOMC is not focused on long-term debt cycles.

In the past, Dalio has pointed to falling spending despite zero (or now negative) interest rates as a sign that economies in the developed world are nearing the end of a debt supercycle. The more traditional stimulus tools, like lower rates and quantitative easing, have incrementally lower impacts, the more governments and central banks will need to directly encourage spending by businesses and consumers.

And at least for now, that’s OK. “If you look around the world, our risk is not inflation and our risk is not overheating economies," Dalio pointed out in the interview.

As for China, which has been at the forefront of the market’s swoons and swings since last fall, Dalio likened the country’s economic restructuring to having heart surgery. “China is having a heart transplant," he said. “You’re probably going to be fine in the long run, [but] it’s probably going to weaken you, and it has to be well executed."

Founded in 1975, Westport, CT-based Bridgewater is the world’s largest hedge fund manager, managing more than $150 billion for institutional investors, foreign governments, central banks, corporate and public pension funds, university endowments and charitable foundations.

In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...