Bridgewater CIO Warns of Deeper, Longer, and ‘Much More Painful’ Recession Than What We’re Accustomed To

Bridgewater Associates Co-Chief Investment Officers: I am warning you. A recession that is “much harder” and “much more painful” than what we are used to. “The dam that fiscal policymakers are now part of the story has broken,” said an executive at the world’s largest hedge fund.

Bridgewater Executive recession warnings

Karen Karniol-Tambour, co-chief investment officer at Bridgewater Associates, said in an interview with Bloomberg last week that things are very different now. I warned you about the recession. Founded by billionaire Ray Dalio, Bridgewater Associates is the world’s largest hedge fund with approximately $130 billion in assets under management.

When asked about the next big risk she expected to come within 10 years, Karniol-Tambour replied:

I’m used to it.

In previous recessions, “central banks could quickly get on board and reverse it,” she notes, noting that central banks just easing everything would not be enough for a recession. was “rapid and shallow” and not “deep”, he added. and long.

She described the COVID-19 pandemic as a turning point, as fiscal policymakers were “deeply involved in solving the problem” for the first time. In addition to central banks printing money, “policymakers basically come in and point money at people,” she said, elaborating:

So, for me, the dam that fiscal policymakers are currently participating in has been broken. The story … far more likely to intervene in a large fiscal expansion.

“On the one hand, monetary policy will become less important because fiscal policy will do what it always does,” she explained. “On the other hand, long-term inflationary pressures and fiscal policymakers’ simultaneous stimulus will put them in a tougher position as inflation becomes more entrenched.”

They are therefore forced to tighten much more than they otherwise would have liked, or have significantly reduced mitigation. They make for much harder, much more painful depressions.

“We are in a place where many of the most important problems have to be solved. We cannot rely on market forces alone. We also need political power,” she said. emphasized. Note that the risks are “exacerbated by how fast the pace of deglobalization increases”.

Karniol-Tambour Opinion:

Of course, the biggest wild her card here is how difficult relations with China will be. Because China is deeply embedded in her supply chain.

“There is a big difference between moderately decoupling them or actually decoupling them from China. There is,” the executive concluded.

Last December, BlackRock, the world’s largest asset manager, similarly said it was headed for a recession “opposite of past recessions,” calling it a “recession.” is carried over. Mad Money’s Jim Cramer said the market has already decided a recession is coming. But U.S. President Joe Biden said last week that he doesn’t believe the U.S. economy will go into recession this year or next.

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