Ray Dalio: What's Happening In The Markets Has Not Happened In Our Lifetime

Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, told CNBC Thursday morning the COVID-19 shutdown could cost U.S. companies $4 trillion.

Dalio, who famously predicted the global financial crisis back in 2008, said in an interview that the current crisis is unlike anything he’s seen in his lifetime.

“What’s happening has not happened in our lifetime before,” Dalio said. “What we have is a crisis.”

The Financial Times reported over the weekend that Brigdewater’s flagship fund, the Pure Alpha Fund II, is already down 20% year-to-date in 2020. In a LinkedIn post on Monday, Dalio said the fund dropped the ball during the current crash rather than making money like it did in 2008.

“We did not know how to navigate the virus and chose not to because we didn’t think we had an edge in trading it. So, we stayed in our positions and in retrospect we should have cut all risk,” Dalio said.

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Aggressive Stimulus Package Needed

U.S. President Donald Trump has been pushing Congress to pass a stimulus package worth between $850 billion and $1 trillion to help counter the negative economic impact of the coronavirus. On Thursday morning, Dalio said $1 trillion may not be enough.

“It depends on if it’s provided as loan guarantees or credits or something along those lines. I would say somewhere in the vicinity of $1.5 trillion to $2 trillion is a minimum,” Dalio said.

Dalio said another risk for investors may come if demand for Treasury bonds takes a hit following the outbreak.

“Then you’re going to have the next wave of the crisis because interest rates rising will cause asset prices to go down more again and they also mean that death squeezes will be a problem and also credit spreads would widen,” Dalio said.

The SPDR S&P 500 ETF SPY opened Thursday’s session down 2.8% following Dalio’s comments.

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Benzinga’s Take

The size and scope of the U.S. stimulus package could have a major impact on the near-term stability of the U.S. markets. The critical part of the stimulus package may not necessarily be the dollars and cents as much as its ability to instill confidence in the markets and the American people and stave off a full-fledged panic.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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