Billionaire Ray Dalio Expects a 20% Drop in Stocks

Written by Luke Burgess
Posted September 21, 2022

After months of elevated inflation, investors are expecting big moves from the Federal Reserve today.

Analysts at Nomura Securities wrote last week that the Fed will jack up short-term rates to a range of 3.25%–3.5% today — and will end up increasing rates to as high as 4.75% by next year. 

The federal funds rate now hovers in a range of 2.25%2.5%.

Federal Funds Rate — 40 Years

As a result, billionaire hedge fund founder Ray Dalio said he was expecting a 20% decline in stocks.

Dalio wrote in a LinkedIn post, “I estimate that a rise in rates from where they are to about 4.5% will produce about a 20% negative impact on equity prices... The economy will be weaker than expected.”

Dalio continued, “This will bring private sector credit growth down, which will bring private sector spending and... the economy down with it.”

The S&P 500 has shed 6.6% since last Monday as inflation data ignited fears of a big rate hike. As I write this now, the S&P sits at about 3,850. Another 20% decline would put the index back under 3,100 and erase a year and a half of gains.

S&P 500 — Two Years

So what does it all mean for gold and precious metals?

Well, that’s anyone’s guess right now.

The precious metals market has become completely out of tune with traditional standards. Rising inflation tends to devalue currencies and boost demand for precious metals like gold and silver. But that hasn’t happened. Instead, the value of the U.S. dollar has soared to a 20-year high, as measured by the U.S. Dollar Index.

As a result, gold prices have plummeted from their March high of over $2,000 to almost as low as $1,650 an ounce today.

Gold Price — One Year

So how will a big hike in short-term rates affect gold?

Well, that depends on how the dollar will react. But given how the greenback has performed over the past several months, that’s completely unpredictable.

Part of what it takes to be an "expert" is knowing when you don't know — especially in investment markets. Public markets are (and always have been, as far as I can tell) highly irrational, and sometimes they become completely absurd. I mean, just consider everything from the Dutch tulip bubble to NFTs. Public markets have at least a 400-year history of throwing people curveballs.

Right now, the precious metals market is simply too upside-down to predict. As I mentioned to other subscribers earlier last week, the best move in the gold and precious metals market right at this particular moment is probably no move at all. Gold and precious metals will likely remain under pressure as long as the dollar stays strong. And there’s just no telling how long that will be or how much stronger the greenback might get from here.

That’s all I’ve got for you today, but before I let you go, I wanted to share some research my colleague Jason Williams just sent over.

He’s been researching all the various shortages and crises that have been plaguing the world the past two years and identified a growing one that’s not getting any attention in the mainstream press.

And he’s convinced it’s about to become a bigger problem than the supply chain issues, labor shortages, and energy crisis combined.

But in every crisis lies opportunity, and Jason found one that could send the shares of a particular company SOARING and turn this unknown gem into a household name.

So I got him to let me share his full report on what he’s calling “The Next Nestle.”

He’s laid out a pretty compelling argument and, with the company’s stock trading for less than $1 and poised to soar as high as $10, it’s a pretty compelling potential profit too.

Check out his report today and get yourself invested BEFORE this small stock becomes a global giant.

Until next time,
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Luke Burgess

Luke’s analysis and market research reach hundreds of thousands of investors every day. Through his work with the Outsider Club and Junior Mining Trader, Luke helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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