Latest News

Ray Dalio Does the Math: Rates at 4.5% Would Sink Stocks by 20%

0

S&P 500

3,946.01

+13.32(+0.34%)

 

Dow 30

31,135.09

+30.12(+0.10%)

 

Nasdaq

11,719.68

+86.10(+0.74%)

 

Russell 2000

1,838.46

+6.89(+0.38%)

 

Crude Oil

89.04

+0.56(+0.63%)

 

Gold

1,707.20

-1.90(-0.11%)

 

Silver

19.61

+0.04(+0.21%)

 

EUR/USD

0.9986

+0.0005(+0.05%)

 

10-Yr Bond

3.4120

-0.0100(-0.29%)

 

GBP/USD

1.1545

+0.0003(+0.03%)

 

USD/JPY

142.8440

-0.2490(-0.17%)

 

BTC-USD

20,271.42

+114.38(+0.57%)

 

CMC Crypto 200

477.69

-5.65(-1.17%)

 

FTSE 100

7,277.30

-108.56(-1.47%)

 

Nikkei 225

27,818.62

-796.01(-2.78%)

 

(Bloomberg) — Ray Dalio came out with a gloomy prediction for stocks and the economy after a hotter-than-expected inflation print rattled financial markets around the globe this week.

Most Read from Bloomberg

Terra Co-Founder Do Kwon Faces Arrest Warrant in South Korea

US Inflation Tops Forecasts, Cementing Odds of Big Fed Hike

Stocks Rise as Dip Buyers Win Tug of War Over Fed: Markets Wrap

Xi Returns to World Stage With Putin to Counter US Dominance

Ugly Selloff Pushes Stocks Down Most Since 2020: Markets Wrap

“It looks like interest rates will have to rise a lot (toward the higher end of the 4.5% to 6% range),” the billionaire founder of Bridgewater Associates LP wrote in a LinkedIn article dated Tuesday. “This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it.”

A mere increase in rates to about 4.5% would lead to a nearly 20% plunge in equity prices, he added.

The rate market suggests traders have fully priced in a 75-basis-point hike next week by the Federal Reserve, with a slight chance for a full percentage point move. Traders expect the Fed fund rate to peak at about 4.4% next year, from the current range of 2.25% and 2.5%.

Dalio noted investors may still be too complacent about long-term inflation. While the bond market suggests traders are expecting an average annual inflation rate of 2.6% over the next decade, his “guesstimate” is that the increase will be around 4.5% to 5%. With economic shocks, it may be even “significantly higher,” he added.

Dalio said the US yield curve will be “relatively flat” until there is an “unacceptable negative effect” on the economy.

A deepening inversion of key curve measures — seen by many as a potential harbinger of recession — has helped reinforce a more downbeat view about economic activity among investors.

Investors, speculating that the Fed will tip the economy into recession next year in the fight to curb inflation, already see policy makers easing rates in the later stages of 2023.

The S&P 500 is heading for its biggest annual loss since 2008, while Treasuries have suffered one of their worst beatings in decades.

Most Read from Bloomberg Businessweek

The Ethereum Merge Ups the Stakes—and Reshapes the Crypto Universe

It’s White-Collar Jobs That Are at Risk in the Next Recession

Chinese Manufacturers Get Around US Tariffs With Some Help From Mexico

A Dubious Truck, a Whistleblower Army, and Inept Spies: Inside the Very Weird Nikola Saga

Tesla’s Autopilot Heads to Trial

©2022 Bloomberg L.P.

Advertisement

TheStreet.com

Bad News Is Piling Up for Chip Makers

The months follow one another and look alike for the manufacturers of semiconductors. For months, fears of a hard landing in the economy due to aggressive interest rate hikes by the Federal Reserve to fight inflation at its highest in 40 years have been a headache since the beginning of the year for Nvidia , Advanced Micro Devices , Intel , Micron and Qualcomm . Nvidia shares have lost more than 13% since the end of August, while AMD shares, which had rebounded well after the release of the second quarter earnings, have fallen by 9.2% since the end of August.

Reuters

Shaken Wall Street awaits final capitulation to greenlight buying

Even as investors crowded the exits on Tuesday, Wall Street’s steepest one-day shake out since early in the pandemic in June 2020 carried few of the hallmarks of capitulation that analysts want to see before calling a bottom. While the S&P 500’s 4.3% slump on Tuesday extended fractionally in early trade Wednesday, it held about half a percent above the 3,900 technical area that looks pivotal to buffering a decline to the June bear market low around 3,666. The benchmark S&P closed Wednesday up about 0.35%.

SmartAsset

How to Buy More than $10,000 in I Bonds Through This Loophole

In a world where the stock market is unpredictable and interest rates are rising, many investors are looking for someplace to put their money that is as close to risk-free as possible – even if it means forgoing the chance … Continue reading → The post How to Buy More than $10,000 in I Bonds Through This Loophole appeared first on SmartAsset Blog.

Bloomberg

IBM to Post $5.9 Billion Pension-Transfer Charge in Third Quarter

(Bloomberg) — International Business Machines Corp. said it would report a $5.9 billion one-time pretax charge in the third quarter as a result of an agreement to offload pension obligations to two life insurers.Most Read from BloombergTerra Co-Founder Do Kwon Faces Arrest Warrant in South KoreaUS Inflation Tops Forecasts, Cementing Odds of Big Fed HikeStocks Rise as Dip Buyers Win Tug of War Over Fed: Markets WrapXi Returns to World Stage With Putin to Counter US DominanceUgly Selloff Pushes S

Reuters

Fed set for another 75-basis-point rate hike; early pivot unlikely: Reuters poll

The Federal Reserve will deliver another 75-basis-point interest rate hike next week and likely hold its policy rate steady for an extended period once it eventually peaks, according to a Reuters poll of economists released on Tuesday. Policymakers have done little to push back on market pricing for a third consecutive rate hike of three-quarters of a percentage point at the U.S. central bank’s Sept. 20-21 meeting, with inflation, as measured by the Fed’s preferred gauge, running at more than three times its 2% target. A strong majority of economists, 44 of 72, predicted the central bank would hike its fed funds rate by 75 basis points next week after two such moves in June and July, compared to only 20% who said so just a month ago.

American City Business Journals

Here’s why Mark Zuckerberg is a bad boss, according to a leadership expert

To understand why Meta Platforms Inc. has been struggling of late and likely won’t rebound anytime soon, one doesn’t have to look much beyond founder and CEO Mark Zuckerberg, according to one leadership expert. Bad bosses can be placed into five different categories, Bill George, a senior fellow at Harvard Business School, told CNBC. Zuckerberg, who has headed Facebook’s parent company since he founded it while a student at Harvard, fits into three of those, George said.

The Wall Street Journal

Elon Musk Says The Fed Should Cut Interest Rates

Billionaire Elon Musk [took to Twitter early Wednesday](https://twitter.com/elonmusk/status/1569951122231787521) to reiterate his concerns about deflation should the Federal Reserve continue to raise interest rates, which he also expressed [via tweet on Friday](https://twitter.com/elonmusk/status/1568383953370767365). Mr. Musk said the central bank should turn to cutting rates by 0.25 percentage point. The Fed is currently expected to [raise rates by at least 0.75 percentage point](https://www.w

TipRanks

How Can I Protect My Portfolio? Here Are 2 ‘Strong Buy’ Dividend Stocks Yielding at Least 8%

According to the latest CPI (consumer-price index) report, U.S. inflation cooled down slightly from July but not enough to appease the markets. Overall prices rose by 8.3% from the same period a year ago, slowing down from July’s 8.5% uptick and further down from June’s 40-year high showing of 9.1%. On a monthly basis, after plateauing in July, consumer prices rose by 0.1%. As the expectation was for a rise of 8.1% over last year and a drop of 0.1% compared to last month, the markets did what th

How to Buy More than $10,000 in I Bonds Through This Loophole

Previous article

Is it possible to save too much for retirement? The top 3 signs you’re going way overboard

Next article

You may also like

Comments

Leave a reply

Your email address will not be published. Required fields are marked *

More in Latest News