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With a net worth of over $14 billion, Ray Dalio is one of the most respected investors on Wall Street. He founded Bridgewater Associates in 1975, which has grown into the largest hedge fund in the world, with approximately $97.2 billion in net assets under management.
Notably, Bridgewater Associates is the fourth most profitable hedge fund in terms of absolute dollar returns, as the fund’s net gains between 1975 and 2023 were approximately $55.8 billion.
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Dalio thinks the US economy is currently “in a relatively good balance” and does not expect multiple interest rate cuts. This is in stark contrast to market expectations, which point to at least two more rate cuts in 2024 alone.
Not on a preset course: Powell
Wall Street welcomed September’s 50 basis point rate cut, while investors speculated about the size of the next rate cut. However, Fed Chairman Jerome Powell has hinted that future rate cuts could be smaller as the central bank cautiously navigates avoiding a recession while curbing inflation.
“If the economy develops broadly as expected, policy will move towards a more neutral stance in the future. But we are not following a predetermined course,” he said. “The risks are two-sided and we will continue to make our decisions one meeting at a time.”
Because the risks associated with rate cuts are two-sided, Powell acknowledged: “This [FOMC] is not a committee that feels in a hurry to reduce rates quickly.”
Dalio’s view on the bond market
Dalio believes that the bond market is in a precarious position and that government bonds in particular have not been great investments of late.
“Treasuries have not been a great investment,” Dalio said at the Greenwich Economic Forum. “We have an interest rate risk in that bond market.”
With institutional investors and central banks holding significant government bonds, Dalio believes the market may be overweight these securities.
Moreover, erratic swings in government bond yields this year are a major deterrent as two-year government bond yields hover between 3.5% and 5%, reflecting a tense market.
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Bridgewater Associates Top Rankings
Dalio retired as co-CIO in 2022 and relinquished control of Bridgewater Associates. However, he still owns a 49.9% stake in the company, according to the Bloomberg Billionaires Index.
The hedge fund has diversified its holdings across multiple sectors, as reflected in its second-quarter 13F filing.
Alphabet
Bridgewater Associates owns 4.54 million shares of Alphabet Inc. (NASDAQ:GOOGL), making it the third largest holding – accounting for 4.32% of the total portfolio. The Magnificent Seven stock has long been an investor favorite.
While the recent Justice Department investigation to break Google’s dominance in the search engine industry has shocked many, industry experts have not reacted sharply to the news.
“We don’t believe there will be any major surprises,” said Doug Anmuth, an analyst at JP Morgan. “We don’t believe the high-level framework will change much for Google stock in the near term.”
In the wake of the DOJ lawsuit, Google wrote in a blog post that “the DOJ’s radical and sweeping proposals risk harming consumers, businesses and developers.”
Analysts are mostly bullish on GOOGL stock, with a price target of $201.64. This indicates a potential increase of almost 25%.
Procter & Gamble
The shares of Procter & Gamble Co. (NYSE:PG) are Bridgewater’s fifth largest holding, accounting for 3.1% of the total portfolio. As of June 30, 2024, the hedge fund’s stake in Procter & Gamble was valued at $592.90 million.
The consumer goods giant’s stable dividend makes it an important investment for defensive activities. The company has increased dividend payments for 68 years in a row, making it a Dividend King. Proctor & Gamble pays $4.03 in dividends annually, yielding a yield of 2.39% on the current share price.
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