Why Ray Dalio Thinks a ‘Market Blowoff’ Rally Is Coming

Ray Dalio, chair of the world’s largest asset management firm, Bridgewater Associates, shared his view on markets at the World Economic Forum in Davos, Switzerland, on Tuesday, January 23, 2018.

The legendary investor said at the World Economic Forum that the market (SPY) might rally further in the near future. He added, “There is a lot of cash on the sidelines…We’re going to be inundated with cash, if you’re holding cash, you’re going to feel pretty stupid.”

The fundamental factors are looking good. Economic growth has been gradually picking up. The labor market, inflation, wage growth, and consumer spending are all improving. On the other hand, tax reforms could also boost the market rally (IWM) (COMP-INDEX) (QQQ).

Dalio also added, “We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws.” He believes “a market blowoff” rally is coming.

The broader market S&P 500 Index (SPX-INDEX) rose 6% between January 2, 2018, and January 23, 2018. The index has had its strongest start to a new year in almost three decades. The index also had a strong performance in 2017 with a rise of 19.5% in 2017.

In the next part of this series, we’ll analyze Ray Dalio’s view on the key risks the market faces.