(Bloomberg) — Ray Dalio came out with a gloomy prediction for stocks and the economy after a hotter-than-expected inflation print rattled financial markets around the globe this week.
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“It looks like interest rates will have to rise a lot (toward the higher end of the 4.5% to 6% range),” the billionaire founder of Bridgewater Associates LP wrote in a LinkedIn article dated Tuesday. “This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it.”
A mere increase in rates to about 4.5% would lead to a nearly 20% plunge in equity prices, he added.
The rate market suggests traders have fully priced in a 75-basis-point hike next week by the Federal Reserve, with a slight chance for a full percentage point move. Traders expect the Fed fund rate to peak at about 4.4% next year, from the current range of 2.25% and 2.5%.
Dalio noted investors may still be too complacent about long-term inflation. While the bond market suggests traders are expecting an average annual inflation rate of 2.6% over the next decade, his “guesstimate” is that the increase will be around 4.5% to 5%. With economic shocks, it may be even “significantly higher,” he added.
Dalio said the US yield curve will be “relatively flat” until there is an “unacceptable negative effect” on the economy.
A deepening inversion of key curve measures — seen by many as a potential harbinger of recession — has helped reinforce a more downbeat view about economic activity among investors.
Investors, speculating that the Fed will tip the economy into recession next year in the fight to curb inflation, already see policy makers easing rates in the later stages of 2023.
The S&P 500 is heading for its biggest annual loss since 2008, while Treasuries have suffered one of their worst beatings in decades.
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The months follow one another and look alike for the manufacturers of semiconductors. For months, fears of a hard landing in the economy due to aggressive interest rate hikes by the Federal Reserve to fight inflation at its highest in 40 years have been a headache since the beginning of the year for Nvidia , Advanced Micro Devices , Intel , Micron and Qualcomm . Nvidia shares have lost more than 13% since the end of August, while AMD shares, which had rebounded well after the release of the second quarter earnings, have fallen by 9.2% since the end of August.
Even as investors crowded the exits on Tuesday, Wall Street’s steepest one-day shake out since early in the pandemic in June 2020 carried few of the hallmarks of capitulation that analysts want to see before calling a bottom. While the S&P 500’s 4.3% slump on Tuesday extended fractionally in early trade Wednesday, it held about half a percent above the 3,900 technical area that looks pivotal to buffering a decline to the June bear market low around 3,666. The benchmark S&P closed Wednesday up about 0.35%.
In a world where the stock market is unpredictable and interest rates are rising, many investors are looking for someplace to put their money that is as close to risk-free as possible – even if it means forgoing the chance … Continue reading → The post How to Buy More than $10,000 in I Bonds Through This Loophole appeared first on SmartAsset Blog.
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The Federal Reserve will deliver another 75-basis-point interest rate hike next week and likely hold its policy rate steady for an extended period once it eventually peaks, according to a Reuters poll of economists released on Tuesday. Policymakers have done little to push back on market pricing for a third consecutive rate hike of three-quarters of a percentage point at the U.S. central bank’s Sept. 20-21 meeting, with inflation, as measured by the Fed’s preferred gauge, running at more than three times its 2% target. A strong majority of economists, 44 of 72, predicted the central bank would hike its fed funds rate by 75 basis points next week after two such moves in June and July, compared to only 20% who said so just a month ago.
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To understand why Meta Platforms Inc. has been struggling of late and likely won’t rebound anytime soon, one doesn’t have to look much beyond founder and CEO Mark Zuckerberg, according to one leadership expert. Bad bosses can be placed into five different categories, Bill George, a senior fellow at Harvard Business School, told CNBC. Zuckerberg, who has headed Facebook’s parent company since he founded it while a student at Harvard, fits into three of those, George said.
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Billionaire Elon Musk [took to Twitter early Wednesday](https://twitter.com/elonmusk/status/1569951122231787521) to reiterate his concerns about deflation should the Federal Reserve continue to raise interest rates, which he also expressed [via tweet on Friday](https://twitter.com/elonmusk/status/1568383953370767365). Mr. Musk said the central bank should turn to cutting rates by 0.25 percentage point. The Fed is currently expected to [raise rates by at least 0.75 percentage point](https://www.w
According to the latest CPI (consumer-price index) report, U.S. inflation cooled down slightly from July but not enough to appease the markets. Overall prices rose by 8.3% from the same period a year ago, slowing down from July’s 8.5% uptick and further down from June’s 40-year high showing of 9.1%. On a monthly basis, after plateauing in July, consumer prices rose by 0.1%. As the expectation was for a rise of 8.1% over last year and a drop of 0.1% compared to last month, the markets did what th