Feb 7, 2018

Ray Dalio: "These big declines are just minor corrections"

What we are seeing is typical late-cycle behavior, though more exaggerated because the durations of investment assets (i.e., their sensitivities to interest rate changes) are greater.  We've just had a taste of what the tightening will be like.  Fiscal stimulation is hitting the gas, which is driving the economy forward into the capacity constraints, which is triggering interest rate increases that are hitting the brakes, first in the markets and later in the economy.   This is happening sooner than we expected.  This confluence of circumstances will make it difficult for the Fed to get monetary policy exactly right.  Still, these big declines are just minor corrections in the scope of things, there is a lot of cash on the side to buy on the break, and what comes next will be most important.

~ Ray Dalio, founder and co-Chief Investment Officer, Bridgewater Associates, world's largest hedge fund with $160 bil AUM, interview on CNBC, January 5, 2018

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