Dalio: Here's What Would Lead to a Nearly 20 Percent Drop in Equity Market
The Trends Journal has reported that the actual rate of inflation is double what's being reported
Ray Dalio, the billionaire founder of Bridgewater Associates, said Wednesday what The Trends Journal has been warning about for months: the higher and faster interest rates rise, the deeper the equity markets and economies—that were artificially boosted with cheap money, artificial money—will decline.
WHAT DALIO POSTED ON LINKEDIN: What do you think? I think it looks like interest rates will have to rise a lot (toward the higher end of the 4.5 to 6 percent range) and a significant fall in private credit that will curtail spending. This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it.
The rise in interest rates will have two types of negative effects on asset prices: 1) the present value discount rate and 2) the decline in incomes produced by assets because of the weaker economy. We have to look at both. What are your estimates for these? I estimate that a rise in rates from where they are to about 4.5 percent will produce about a 20 percent negative impact on equity prices (on average, though greater for longer duration assets and less for shorter duration ones) based on the present value discount effect and about a 10 percent negative impact from declining incomes.
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WHAT HAPPENED: The U.S. stock market saw its worst day in years after the Labor Department’s Consumer Price Index showed prices rose by 8.3 percent in the 12 months ending in August, which was higher than traders had been anticipating. The jump was blamed on increases in medical, food, and shelter prices.
TRENDPOST: Trends Journal subscribers know that we have criticized Jay Powell, the Federal Reserve chairman, and U.S. Treasury Secretary Janet Yellen for claiming for over a year-and-a-half that inflation was “temporary” then “transitory,” and only admitting to it when it could no longer be denied.
Also, as we had noted, they were either too stupid to see the facts, or were lying about inflation’s spike so they could keep interest rates at historic lows to keep artificially pumping up equity markets and the economy.
The reality is front and center on Main Street and will be hitting Wall Street, driving all indexes deep into bear territory as the Federal Reserve keeps raising interest rates to bring down inflation... measures they should have imposed a year-and-a-half ago when inflation began to rise.
However, as we have greatly detailed, across the Western bloc, the Banksters and government rulers denied inflation was rising, calling it temporary and transitory which the mainstream media supported... blacklisting those of us who provided facts that it was real and would continue to escalate.
The hardest hit will be the commercial business sector as the work-at-home trend becomes a permanent part of workforce culture, as companies downsize to save rental expenses... and go out of business as economic conditions deteriorate.
And, as Gerald Celente has warned, the deeper the economy falls the higher crime and violence will rise: “When people lose everything and have nothing left to lose, they lose it.” And as a result of the COVID War, which we had long warned about when politicians launched it, the data proves, with crime rates sharply rising... people have lost it.
Also, the deeper economic conditions fall and the higher social unrest rises, the louder war drums beat, as they are in the War between Ukraine, NATO and the U.S. vs. Russia. As Mr. Celente notes: “When all else fails, they take you to war.”