Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Despite authorities taking their foot off the environmental, social and governance pedal and recent volatility in equities and bonds, the benefits of Artificial Intelligence and improved investor transparency are just beginning.
Dalio’s mea culpa on coronavirus: it may cost US$12t
Ray Dalio, the famed hedge fund manager who founded Bridgewater Associates in 1975, has done a backflip on his initial view of the damage to be caused by coronavirus. He now says it will cost US companies about US$4 trillion (A$6.9 trillion) and the wider world perhaps US$12 trillion.
The US$160 billion manager, still controlled by Dalio, told investors last week, on March 18, that its ‘All Weather’ funds lost 14 per cent in the year to date and a leverage version, the ‘Pure Alpha’ macro fund, lost 21 per cent.
Dalio told CNBC television that he had underestimated the impact of the virus. He was quoted as saying, on February 11, that the disease’s impact on the markets had been “exaggerated.” And in the not-too-distant future, the epidemic won’t seem that important. “It most likely will be something that in another year or two will be well beyond what everyone will be talking about,” Dalio told a conference in Abu Dhabi, according to US investment media outlet ‘Chief Investment Officer’. In the meantime, he observed last month, the virus “probably had a bit of an exaggerated effect on the pricing of assets because of the temporary nature of that, so I would expect more of a rebound”.
Last week, however, after the performance of his own and also competitor funds during the past few weeks, he said that globally, the amount of money needed for businesses could “notch up to $12 trillion”.
“What’s happening has not happened in our lifetime before,” Dalio said on CNBC. “There’s a need for the Government to spend more money, a lot more money.” He thought about US$1.5 trillion to US$2 trillion at a minimum. Last week, the US Government announced a US$1 trillion assistance package.
On Thursday (March 19), Goldman Sachs released an apocalyptic figure. It said bout 2.25 million Americans were expected to have filed jobless claims last week. That’s up from 281,000 a week earlier, the ‘CIO’ newsletter reported.
Dalio told CNBC that Bridgewater’s managers were “kicking ourselves” for missing the move. “What happened was it didn’t come from the usual places, it came from not the usual ways that downturns come.”
– G.B. Â
