- Ray Dalio, the billionaire founder of hedge fund Bridgewater Associates, shared his views on the COVID-19 pandemic.
- The legendary fund manager correctly predicted the 2008-2009 global financial crisis. He also warned about a stock market crash last year.
Ray Dalio on US stock market crash
Ray Dalio has been warning about a bear market in bonds for many quarters. The legendary fund manager correctly predicted the 2008–2009 global financial crisis. Bridgewater Associates performed well during that period compared to other hedge funds. Last year, Ray Dalio warned about a stock market crash. While US stock markets tanked in the first quarter of 2020, they have recouped most of the losses. The Dow Jones Index (NYSEARCA:DIA) has fallen by 17.4% year-to-date. That said, the COVID-19 pandemic caused the stock market crash, which was a typical black swan event.
Ray Dalio’s views on COVID-19
Now, Ray Dalio has expressed his views on COVID-19. He sees a long period of “restructuring” after the pandemic is over. According to Ray Dalio, the pandemic has exposed the vulnerability of the US and highlighted China’s centrality in global supply chains. The US imports medical equipment from China even though President Trump warned the country about consequences. President Trump also called the coronavirus the “Chinese virus.” According to Ray Dalio, both countries, as well as individuals, should strive for self-sufficiency.
US-China trade war
There was a churn in global supply lines amid the US-China trade war. Now, the trend of companies looking to diversify their production from China will increase after the pandemic. Across the globe, there’s palpable anger towards China. Companies will likely be under pressure from consumer groups and politicians to lower their reliance on China. However, shifting reliance from China will be a long and painful exercise.
COVID-19 impacts stock markets and economy
Ray Dalio also voiced his concern about partisan politics during the pandemic. However, he thinks that the current downturn will be “relatively brief.” Notably, governments across the world have announced massive stimulus packages to help companies and individuals. Central banks have also chimed in with rate cuts. We’re back to zero-bound interest rates in the US. However, the stimulus will add to some countries’ already dire fiscal situation. The stimulus might even lay the seeds for the next debt bubble. Read COVID-19 Impacts US Stock Markets and Economy to learn more.