Ray Dalio: the sun is shining on the global economy

Ray Dalio, the founder of Bridgewater Associates, thinks conditions in the global economy look "pretty sunny". But for investors, political issues are now more important than macroeconomic ones.


2016 Getty Images

"Conditions in the global economy look pretty sunny," says Ray Dalio, the founder of Bridgewater Associates, "and this is likely to keep supporting equity prices for a while, particularly if investors take their cash hoards and invest them in the markets this year." However, he is worried that, as growth improves, "central banks will find it tough to raise rates without sparking a recession in a couple of years' time".

Advertisement - Article continues below

In the long run, Dalio thinks that political issues are now more important than macroeconomic ones. So investors should spend less time focusing on monetary policy and more on analysing issues such as "the next election in France or in the UK, or how hospitable Jeremy Corbyn will be to capital". The surge in political risk is made clear by the fact that global support for populist parties has risen from 7% in 2010 to 35% in 2016. A swing of this magnitude "has apparently only ever happened once before, in the 1930s", just before World War II.

What's behind the backlash?

Dalio believes the issue is rising inequality. We now have "multiple economies", he says. And while "the elite live in an expanding economy, for the bottom 60%, 80%, there is a depressed economy that is not growing well". Automation could make things worse "we're headed for a world where you're either going to be able to write algorithms and speak that language or be replaced by algorithms". A final risk comes from global debt levels. Dalio doesn't expect a 2008-style credit crunch. However, he does envisage "a tightening financial squeeze, which is going to hurt the bottom 60% more and more, particularly when we have the next recession".




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
UK Economy

Mervyn King: why the Covid pandemic is a classic example of radical uncertainty

This week, Merryn talks to ex-governor of the Bank of England Merryn King about the pandemic and how to prepare for a future that is unknowable; the g…
2 Jun 2020
UK Economy

“Stealth” debt jubilees are here – and that’s a very good thing

We may not have had a full-scale debt jubilee, but many Covid relief measures quietly amount to “micro-jubilees”. That’s something to celebrate, says …
1 Jun 2020

Sales will bounce back, but will profits?

As the lockdown ends, everyday life will resume – just don’t expect business as usual, says Matthew Lynn.
31 May 2020

Most Popular

UK Economy

What bounce back loans can tell us about how we’ll pay for all this

The government will guarantee emergency "bounce back loans" for small businesses hit by Covid-19. Inevitably, many businesses will default. And there'…
1 Jun 2020

This looks like the biggest opportunity in today’s markets

With low interest rates and constant money-printing, most assets have become expensive. But one major asset class hasn’t. John Stepek explains why com…
2 Jun 2020
Global Economy

The MoneyWeek Podcast: James Ferguson on the virus, the lockdown, and what comes next

Merryn talks to MoneyWeek regular James Ferguson of Macrostrategy Partnership about what's happened so far with the virus; whether the lockdown was th…
28 May 2020