Ray Dalio predicts stock markets ‘will go down’ if Fed keeps raising rates

Bridgewater Associates founder Ray Dalio is predicting a decline for the stock markets will occur if the Federal Reserve continues to aggressively raise interest rates as a strategy for combating inflation.

In a posting on his LinkedIn page, the Westport-based hedge fund executive wrote, “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.”

Dalio forecasted “markets will go down” as interest rates rise, adding “the economy will be weaker than expected. This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it.”

Dalio also stated this will not occur immediately since cash levels and wealth levels are still relatively high.

“We are now seeing that happen,” he continued. “For example, while we are seeing a significant weakening in the interest rate and debt dependent sectors like housing, we are still seeing relatively strong consumption spending and employment.”