Monthly hotter than expected Inflation Report The stock market was thrown into the loop on Tuesday, and a senior executive at the world’s largest hedge fund says it’s just the beginning of investor pain.
In an interview with SALT Hedge Fund Conference In New York on Monday, Greg Jensen, co-CEO of investment at Bridgewater Associates, said the stock market had not been fully priced into a recession, and that the United States was at the center of a global bubble that had yet to burst.
Share CIO, A Three times with honors on me luckThe list of rising 40-under-40 business stars has made it clear that investors are overestimating the Fed’s ability to tame inflation and that asset prices will eventually continue to fall as a result.
“I think the biggest mistake right now is thinking we’re going to, basically, go back to similar pre-COVID prices,” Jensen said, in Reuters.
Bridgewater Associates . declined luck’s Comment request.
Monday’s bearish forecast wasn’t the first time Jensen has raised his concerns about the US economy and the stock market. In August, CIO . shared Tell Bloomberg That markets are in the midst of a “declining globalization” trend and expect stocks to fall another 20% to 25% as the Federal Reserve continues to raise interest rates.
Jensen’s comments mirrored earlier statements from his fellow Chief Investment Officer, Bob Prince, who Tell Bloomberg In May at the World Economic Forum in Davos, the US was on the cusp of stagflation – a toxic economic combination of low growth and high inflation – and that investors were not properly responsible for the impact of the Fed’s monetary tightening.
However, on Monday, Jensen indicated that Bridgewater could generate profits for its clients amid a market downturn by shorting — or betting on — stocks of select companies.
The leading hedge fund has sold nearly 28 European companies for a total position worth up to $10.5 billion in Juneto me Data collected by Bloomberg. But it reduced its short positions on European companies to just $845 million in August.
Trade was probably profitable, with the EURO STOXX 50 Index, which tracks 50 leading companies in 11 European countries, down more than 17% this year amid Energy crisis in Europe.
Bridgewater’s flagship Pure Alpha II fund has also been successful this year, rising 21.5% through July, according to unnamed Bloomberg sources.
Expect in time
Jensen’s comments about investors discounting the impact of higher consumer prices and interest rates came before a worse-than-expected inflation reading on Tuesday that caused daw The Jones Industrial Average fell more than 1,200 points.
Consumer prices jumped 0.1% in August and 8.3% from a year ago, and Bureau of Labor Statistics revealed. Economists were surprised by the increase, as most expected consumer prices to fall in August amid a 10.6% monthly drop in gasoline prices.
However, higher home prices, Medicare costs and new car prices helped keep inflation high in August. Core consumer prices, which do not include volatile energy and food prices, jumped 6.3% last month from a year ago. This is a significant increase from the 5.9% rate recorded in June and July.
Experts say it’s a sign that inflation is becoming “entrenched” and that the Fed should do more to bring it down – just as Bridgewater said over the course of the year.
“We continue to believe that markets are underestimating how entrenched inflation is in the United States and the magnitude of the response likely to be required from the Fed to remove it,” Nomura’s Ichi Amemiya, a US economist, wrote in a research note on Tuesday. The Federal Reserve will have to raise interest rates by 100 basis points at its next meeting to ensure price stability.