Bridgewater Associates founder and co-Chairman Ray Dalio is predicting that a Joe Biden victory on Election Day will be a “negative initially” for financial markets but will not create long-term damage.
In an interview with Top1000funds.com, the hedge fund executive explained that the prospect of a Biden administration would be first viewed by the markets as “not good” because the Democratic candidate has campaigned on the platform of increasing corporate tax rates and raising taxes on offshore income.
But Dalio theorized that the Biden pledge to generate a massive fiscal stimulus package could change minds because “the value of money is going to go down ”“ that”™s what makes everything go up,” adding this was the principle used by President Franklin D. Roosevelt to bring the nation out of the Great Depression.
“We look at markets through the lens of a currency and so we judge everything on whether it goes up in that currency,” Dalio said. “But we sometimes make the mistake of not realizing that sometimes those things going up are really because the currency is going down.”
Dalio further noted that when the government prints more money, it produces more debt and “makes it an unattractive asset. And so, what we’ve seen is other assets ”“ stocks, gold and so on ”“ rise as real interest rates have gone down.”
As for the prospect of President Trump being re-elected, Dalio believed the markets would “probably produce an initial beneficial reaction, probably longer, a little bit less. Capitalists like capitalists and capitalism. Either way you’re going to get a lot of stimulation ”“ you’ll just get more with Biden.”
