Ray Dalio's protégé warns stocks could plunge another 20% - and markets aren't pricing in the painful recession ahead

• US stocks are likely to tumble another 20% over the next six months, Greg Jensen said.
• The Bridgewater co-chief investor is bracing for a much worse recession than markets expect.
• Stocks could bottom in the early summer, and the economy might hit a trough in early 2024, he said.

US stocks could tumble more than 20% over the next six months, and investors are underestimating the harsh recession that lies ahead, Greg Jensen has warned.

"You might go way past that, but I think it would be about another 20%," Jensen said in a recent MarketWatch interview.

He pointed to rising interest rates and slowing earnings growth as the key drivers of his stock-market forecast, which puts the S&P 500 around 3,000 points at its nadir, or nearly 40% below its January peak.

Jensen is the co-chief investment officer of Bridgewater Associates, and counts the hedge fund's billionaire founder, Ray Dalio, as his mentor.

He suggested stocks won't reach a trough until the Federal Reserve, which is currently hiking interest rates and shrinking its balance sheet to curb red-hot inflation, starts loosening its monetary policy in the early summer. Moreover, the economy might not reach its low point until early 2024, he said.

"You probably won't see the bottom of the equity markets until they begin easing, six to seven months from now," Jensen said. "You probably won't see the end of the bottom of the economy for another nine months or so after that."

The Bridgewater boss warned tighter economic conditions are likely to hammer corporate profits far more than Wall Street is anticipating. He also predicted inflation will remain stubbornly above the Fed's target rate of 2% for years to come. Given that challenging backdrop, he's bracing for a historic downturn.

"We are expecting a much bigger recession than the markets are expecting," he said. "2023 will likely be the year of a very significant global recession."

Jensen has previously warned the Fed can't conquer inflation without tanking financial markets and sparking a painful recession. He's also cautioned the US is the epicenter of a global financial bubble, putting it at high risk of an economic disaster.

Read more: A housing economist shares estimates of where mortgage rates will be by the end of this year and next — and lists the states that may see the most price corrections.

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By: [email protected] (Theron Mohamed)
Title: Ray Dalio's protégé warns stocks could plunge another 20% - and markets aren't pricing in the painful recession ahead
Sourced From: markets.businessinsider.com/news/stocks/bridgewater-jensen-dalio-stock-market-inflation-recession-fed-hikes-earnings-2022-11
Published Date: Fri, 04 Nov 2022 13:48:21 +0000

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