The stock market is plunging and could fall a lot further with the U.S. at the center of a huge global bubble, says chief investment officer of world’s largest hedge fund

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A hotter-than-expected monthly inflation report threw the stock market for a loop on Tuesday, and a top executive at the world’s largest hedge fund argues that it’s just the beginning of the pain for investors.

In an interview at the SALT hedge fund conference in New York on Monday, Greg Jensen, co–chief investment officer of Bridgewater Associates, said that the stock market hasn’t fully priced in a recession, and that the U.S. is at the center of a global bubble that has yet to burst.

The co-CIO, a three-time honoree on Fortune’s 40 Under 40 list of rising business stars, made the case that investors are overestimating the Federal Reserve’s ability to tame inflation and that ultimately asset prices will continue to fall as a result.

“I think the biggest mistake right now is the belief we’re going to return to, essentially, prices similar to the pre-COVID,” Jensen said, per Reuters.

Bridgewater Associates declined Fortune’s request for comment.

Monday’s bearish prediction wasn’t the first time Jensen has spoken out about his fears for the U.S. economy and stock market. In August, the co-CIO told Bloomberg that markets are in the midst of a “de-globalization” trend and forecast that stocks would fall another 20% to 25% as the Fed continues raising interest rates.

Jensen’s comments echoed previous statements from his fellow chief investment officer, Bob Prince, who told Bloomberg in May at the World Economic Forum in Davos that the U.S. is on the cusp of stagflation—a toxic economic combination of low growth and high inflation—and that investors weren’t properly accounting for the impact of the Fed’s monetary tightening.

However, on Monday, Jensen noted that Bridgewater can create profits for its clients amid the market downturn by shorting—or betting against—the stocks of select companies.

The leading hedge fund shorted some 28 European companies for a total position valued at up to $10.5 billion in June, according to data compiled by Bloomberg. But it cut its disclosed short positions on European firms to just $845 million in August.

The trade was likely a profitable one, as the EURO STOXX 50 index, which tracks 50 blue-chip companies in 11 European nations, is down more than 17% this year amid Europe’s energy crisis.

Bridgewater’s flagship Pure Alpha II fund has also found success this year, rising 21.5% through July, according to unnamed Bloomberg sources.

Jensen’s comments about investors discounting the impact of rising consumer prices and interest rates came just before a worse-than-expected inflation reading on Tuesday that caused the Dow Jones industrial average to plunge over 1200 points.

Consumer prices jumped 0.1% in August and 8.3% from a year ago, the Bureau of Labor Statistics revealed. Economists were surprised by the increase, as most had expected consumer prices to cool in August amid a 10.6% monthly drop in gasoline prices.

Rising shelter prices, medical care costs, and new car prices helped keep inflation elevated in August, however. And core consumer prices, which exclude volatile energy and food prices, jumped 6.3% last month from a year ago. That’s a considerable rise from the 5.9% rate seen in June and July.

Experts say it’s a sign that inflation is becoming “entrenched” and the Fed will have to do more to bring it down—just as Bridgewater has said throughout the year.

“We continue to believe markets underappreciate just how entrenched U.S. inflation has become and the magnitude of response that will likely be required from the Fed to dislodge it,” Nomura’s Aichi Amemiya, a U.S. economist, wrote in a research note on Tuesday, arguing the Federal Reserve will be forced to raise rates by 100 basis points at its next meeting to ensure price stability.

This story was originally featured on Fortune.com

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