Bridgewater: The FED will turn the US economy from hot to mediocre

"The US economy is facing an increasing risk of slowing down as tighter monetary policy is putting pressure on financial markets," said Bob Prince, chief investment director at Bridgewater.

He believed that occurred recently market turmoil triggered by investors, realizing that high economic growth and stable corporate earnings this year will probably rise, but will not have a strong positive impact on the index, as interest rates jump and this will reduce the impact of tax concessions.

"We are at a time when the economy is moving from" hot to incompetent, "says Prince.

Prince, who manages assets worth $160b., Along with company founder Ray Dalio, said: "Now we are approaching the stage where monetary tightening may lead, perhaps not a big drop, and more pressure.

Yields on government securities started to sharply rise earlier this month as a number of economic data in the US and comments by the staff of the FED forced investors to rethink their view about at what pace and how the central bank will raise interest rates.

"This week may be fading in history and not remembering it, but we are clearly shifting from the monetary easing to monetary tightening age, if that is what is happening, it is unlikely to be a one-week event." - says Prince.

With the pace of the US economy expected to grow, next year's forecasts are more sluggish, and some analysts expect a deeper decline in growth in 2019 and 2020.

Prince and Bridgewater as a whole are of the opinion that the dangers to markets are mitigated, given the improved sustainability of the financial system. The fund is of the opinion that the next crisis will be in the form of a broad consolidation, rather than an index crash, similar to 2008.

Source: Financial Times

Photo: Wikipedia

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