Ray Dalio warns against the Fed triggering anything worse than high price. Here are his top picks for today


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Ray Dalio warns, “Reducing Inflation will Come at a Great Cost”: Ray Dalio says that the Fed will likely cause something worse than high prices. Here are his favorite things today

Cash is the king, according to some. But according to Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, it may not be wise to keep too much of your investment money in cash these days.

“Cash is not a safe investment, is not a safe place because it will be taxed by inflation,” Dalio told CNBC last year.

But 40-year high inflation isn’t the only thing that’s concerning the billionaire investor at the moment.

In a LinkedIn post last month, Dalio warns that Fed’s tightening could lead to stagflation – an economic condition marked by high inflation, but without the robust economic growth and employment that usually come with it.

“My main point is that while tightening reduces inflation because it results in people spending less, it doesn’t make things better because it takes buying power away. It just shifts some of the squeezing of people via inflation to squeezing them via giving them less buying power,” he writes.

“[O]ver the long run the Fed will most likely chart a middle course that will take the form of stagflation.”

If you’re still unsure, What to do with this dark outlook?, here’s a look at some of the biggest holdings at Dalio’s hedge fund.

Don’t miss

Vanguard FTSE Emerging Markets FTSE ETF (VWO).

According to Bridgewater’s latest 13F filing to the SEC, the fund held 22.72 million shares of Vanguard FTSE Emerging Markets ETF at the end of March. With a market value of around $1.05 billion at the time, VWO was the largest holding in Dalio’s portfolio.

VWO tracks FTSE Emerging Markets All Cap China A Inclusion Index. This provides investors convenient exposure to stocks within emerging markets such as China, Brazil, South Africa, and South Africa.

The ETF has more than 5,000 stocks. The ETF’s top holdings include major industry players such as Taiwan Semiconductor Manufacturing and Tencent Holdings in China.

In a recent conversation with another investing legend, Jeremy Grantham, Dalio said he’s looking at countries with good income statements and balance sheets that can Weather the storm.

“Emerging Asia is very interesting. India is interesting,” he adds.

Procter & Gamble (PG)

Bridgewater’s second-largest holding is a defensive stock with the ability to deliver cash returns to investors in different economic environments: Procter & Gamble.

In April, P&G’s board announced a 5% dividend increase, marking the company’s 66th consecutive annual payout increase. Current dividend yield is 2.5%.

It’s easy to see why the company is able to maintain such a streak.

P&G is a consumer staples giant with a portfolio of trusted brands like Bounty paper towels, Crest toothpaste, Gillette razor blades, and Tide detergent. These are products households will buy regularly, no matter what the economy is doing.

Alibaba Group Holdings (BABA).

Chinese tech stocks haven’t exactly been market darlings. Alibaba Group, the Ecommerce giant, is down 40% over 12 months.

Bridgewater Associates likes the company. As of March. 31, it owned 7.5 million shares of Alibaba — a stake valued at $813.9 million at the time.

Contrarian investors may be interested in the Alibaba share price decline. In fact, it is possible that we are already at an inflection stage.

According to the latest earnings report, Alibaba’s revenue grew 9% year over year to $32.2 billion in the March quarter. Its adjusted earnings of $1.55 per share handsomely beat Wall Street’s expectation of $1.07 per share.

Alibaba stock has increased by nearly 50% in the time since the earnings report.

Next: What should you read?

  • Sign upSubscribe to MoneyWise Newsletter to Receive a Consistent Flow of MoneyWise Actionable ideasFrom Wall Street’s Top Firms

  • US is only a few days away from an ‘absolute explosion’ on inflation — here are Three shock-proof areasProtect your portfolio with these tips

  • ‘There’s always a bull market somewhere’: Jim Cramer’s famous words suggest you can make money no matter what. Here are some examples 2 powerful tailwindsTake advantage of the opportunities today

This article does not constitute advice and is intended to provide information only. It is provided without warranty.


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