Ray Dalio Says 'Perfect Storm' Forming As Fed Hikes Rates: 'There'll Be Real Pain Of Course'

Billionaire investor Ray Dalio has warned of a "perfect storm" that will spread economic pain as the U.S. Federal Reserve hikes interest rates and said government stimulus programs during the COVID-19 pandemic had created a bubble. 

What Happened: "The Fed and the government together gave enormous amounts of debt and credit and created a ... giant lurch forward and created a bubble. Now they're putting on the brakes. So now we're going to create a giant lurch backward," Dalio, who founded the world’s largest hedge fund Bridgewater Associates and recently relinquished control of it, said at the Greenwich Economic Forum, according to a Reuters report.

Also Read: Best Online Stock Broker For Beginners

Dalio also said domestic tension in the U.S. population caused by "irreconcilable differences" and a yawning wealth gap, coupled with international conflicts, are contributing to the "perfect storm."

Interest Rates: He pointed out that the Federal Reserve will continue to hike rates to fight inflation. "And there'll be real pain, of course," he said. "I don't know whether that's 4.5% or the economy could not take an interest rate much higher than that before it's going to be negative.” 

Market experts have been warning of difficult times ahead. JPMorgan Chase & Co JPM CEO Jamie Dimon on Monday said the U.S. and global economies were likely to slip into a recession next year.

Price Action: Following aggressive Fed rate hikes this year, assets from equities to bonds have taken a hit. The SPDR S&P 500 ETF Trust SPY has lost over 25% so far this year, while the Vanguard Total Bond Market Index Fund ETF BND has shed over 16%.

Read Next: Ray Dalio Heaps Praise On 'Hero' Ben Bernanke For Winning Economics Nobel: 'A Very Rare Breed'

Photo via World Economic Forum on Flickr

Market News and Data brought to you by Benzinga APIs
Price Target
Posted In: Analyst ColorNewsSector ETFsTop StoriesEconomicsFederal ReserveAnalyst RatingsMediaETFsBridgewater AssociatesInterest RatesRay Dalio
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!