Billionaire Ray Dalio Is Skeptical Of The Recent Rate Cuts – These Are The Stocks He's Holding

With a net worth of over $14 billion, Ray Dalio is one of the most respected investors on Wall Street. He founded Bridgewater Associates in 1975, which has grown to become the world's largest hedge fund, with roughly $97.2 billion in net assets under management. 

Notably, Bridgewater Associates is the fourth most profitable hedge fund in terms of absolute dollar returns as the fund's net gains amounted to approximately $55.8 billion between 1975 and 2023. 

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Dalio thinks the U.S. economy is "in a relatively good balance" right now and doesn't foresee multiple rate cuts. This sharply contrasts with market expectations, which signal at least two more rate cuts in 2024 alone. 

Not On Any Preset Course: Powell 

Wall Street rejoiced at the September rate cut by 50 basis points, with investors speculating about the magnitude of the next rate cut. However, Fed Chair Jerome Powell has hinted that future rate cuts might be smaller as the central bank cautiously navigates avoiding a recession while bringing down inflation. 

"Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course," he said. "The risks are two-sided and we will continue to make our decisions meeting by meeting."

As the risks associated with rate cuts are two-sided, Powell acknowledged, "This [FOMC] is not a committee that feels like it's in a hurry to cut rates quickly."

Dalio's Outlook On The Bond Market 

Dalio believes the bond market is in a precarious position and Treasury bonds, particularly, have not been great investments recently. 

"Treasury bonds have not been a great investment," Dalio said at the Greenwich Economic Forum. "We have an interest rate risk in that bond market." 

With institutional investors and central banks holding substantial Treasuries, Dalio thinks the market may be overweighted in these securities. 

Furthermore, the erratic fluctuations in Treasury yields this year are a major deterrent as the two-year Treasury yield has swung between 3.5% and 5%, reflecting a market on edge.

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Bridgewater Associates' Top Holdings

Dalio retired as co-CIO in 2022 and gave up control of Bridgewater Associates. However, according to the Bloomberg Billionaires Index, he still owns a 49.9% stake in the company. 

The hedge fund has diversified its holdings across multiple sectors as evidenced by its second-quarter 13F filing. 

Alphabet 

Bridgewater Associates owns 4.54 million shares of Alphabet Inc. GOOGL, making it its third-largest holding – accounting for 4.32% of the total portfolio. The Magnificent Seven stock has been an investor favorite for a long time. 

While the recent probe by the Department of Justice to break up Google's dominance in the search engine industry has shocked many, industry experts have not reacted sharply to the news. 

"We don't believe there are any major surprises," stated Doug Anmuth, an analyst at J.P. Morgan. "We don't believe the high-level framework changes much for Google shares near term."

In the wake of the DOJ's court filing, Google wrote in a blog post that the “DOJ's radical and sweeping proposals risk hurting consumers, businesses and developers." 

Analysts are mostly bullish on GOOGL stock, with a price target of $201.64. This indicates a potential upside of nearly 25%. 

Procter & Gamble

Procter & Gamble Co. PG stock is Bridgewater's fifth-largest holding, accounting for 3.1% of the total portfolio. As of June 30, 2024, the hedge fund's stake in Procter & Gamble was valued at $592.90 million. 

The consumer goods giant's stable dividend makes it a staple investment for defensive plays. The company has increased dividend payouts for 68 consecutive years, making it a Dividend King. Proctor & Gamble pays $4.03 in dividends annually, yielding 2.39% on the current price.

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