Speaking at Davos last week, the CEO of the world’s largest hedge fund said that he’s not concerned about an immediate downturn. In fact, he sees “a jolt of stimulation” pushing the stock market higher and spurring economic growth. But, he says, the U.S. economy will eventually have another down turn, and foresees a recession just before the 2020 general election.
“[W]hat I’m concerned about is what would the next downturn be like? I’m not worried about an immediate downturn. But I would say if we were to look two years forward, okay, probably right before the next presidential election, there is a good chance that you will have a downturn and if you have a downturn for that segment, I’m worried about how we will be with each other in that element of cohesiveness. I mean, basically the formula for having problems, social with political problems, is have a difference between, a lot of difference between rich and poor people…”
And how the Federal Reserve handles interest rates will have a large effect on when the next recession hits:
“I think it’s a very difficult thing to get monetary policy precise. That’s why we have recessions because you never can get it exactly right. I think it’s particularly difficult to get it right now because of the fact that interest rates are so low… because the duration of bonds and debt has lengthened, it just takes a little change in interest rates to have a bear market.”
(Analyst Comment: This is by far the most concerning thing I’ve read about regarding the U.S. economy and the future of this country. We know that despite the economic optimism of today, the fundamentals are not beneficial to the country in the long term. We’ve lived with the Jim Rogerses and Peter Schiffs and Marc Fabers and Jim Rickardses, who for years have been predicting financial catastrophe. We’ll keep looking at this from different angles, however, Ray Dalio’s opinion carries a lot of weight and we should seriously consider what he’s saying.)