Bridgewater's co-chief investor says the US is at the center of a global financial bubble - and warns a crushing recession is on the cards
- Greg Jensen predicted asset prices wouldn't bounce back to pre-pandemic levels.
- The Bridgewater boss diagnosed a huge financial bubble, and flagged the risk of a painful recession.
US asset prices won't rebound to pre-pandemic highs, and investors face the prospect of a massive market crash and a severe recession, Greg Jensen warned at the SALT conference in New York on Monday.
"The biggest mistake right now is the belief we're going to return to essentially prices similar to the pre-COVID [period]," the co-chief investor of Bridgewater Associates said, according to Reuters.
The hedge fund boss warned that investors are overestimating the Federal Reserve's ability to curb inflation, meaning current market prices understate the risk of a deep, broad, and lengthy recession, Reuters said.
Jensen also asserted that the US is at the center of a global financial bubble, and therefore it's the country most at risk of massive fallout when it inevitably bursts.
The Bridgewater boss estimated in August that asset prices were up to 30% higher than they should be, based on their historical relationship to corporate cash flows. He predicted they would plummet by as much as 25% as a result.
Ray Dalio, Bridgewater's founder and another of its co-chief investors, issued his own bleak outlook for stocks in May. The billionaire investor predicted the Fed wouldn't be able to raise interest rates high enough to offset inflation, leading to negative real returns for stock portfolios.
Bob Prince, the hedge fund's third and final co-chief investor, also declared in May that the US economy was on the brink of stagflation, and investors were too confident that inflation would recede.