The stock market has an 'overflowing river of liquidity' from the previous stimulus, the co-CIO of the worlds largest hedge fund says

• Bridgewater's Bob Prince told CNBC on Wednesday that the stock market is facing an "overflowing river of liquidity" from the combination of government spending to replace lost income and high rates of saving.
• The hedge fund's co-chief investment officer said the US administration post election will only "re-route" the river and the liquidity is unlikely to go away with a Biden presidency.
• However, the benefits of the liquidity don't affect all assets equally, he said.
• "You have store holds of wealth whether they be equities or gold that benefit from the liquidity effect, and you have other types of assets that are hurt by the contraction in incomes," said Prince. "So until the virus effect on spending goes away that will just be really a persistent pressure."
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The stock market is facing an "overflowing river of liquidity" from spending, and the new government administration will only "reroute" the river as there's no sign of fiscal or monetary tightening any time soon, Bob Prince told CNBC on Wednesday.

The Bridgewater Associates co-chief investment officer said spending as a result of the pandemic is driving markets, and this is unlikely to change drastically now that the election is over. He said three kinds of financial resources are behind the spending: money, credit, and income.

"There's lots of money out there, there's lots of credit, mostly coming from the government," said Prince.
That government borrowing has more than replaced the lost income that people have had, while savings rates have gone up."

This combination of replaced lost income and savings rates has produced an "unprecedented" accumulation of cash on balance sheets around the world, he added.

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"There's a huge pile of money sitting out there as the inertia of the prior polices, and there's really no sign of tightening on the horizon," said Prince. He also said the US won't see fiscal or monetary tightening any time soon, and there's going to be more stimulus.

All of this is creating liquidity that's unlikely to change with a Biden presidency.

"The effect of a shift in politics is somewhat of a rerouting of that river, but it's a big river that's overflowing at the banks."

He added that the way the coronavirus affects spending and liquidity will continue to be a "pressure" that adversely affects certain assets while benefiting others.

"You have storeholds of wealth whether they be equities or gold that benefit from the liquidity effect and you have other types of assets that are hurt by the contraction and incomes and so until the virus effect on spending goes away that will just be really a persistent pressure." Prince said.