Billionaire Ray Dalio Just Issued A Dire Warning To Investors – This Is To Prepare For Tough Times Ahead

Billionaire Ray Dalio Just Issued A Dire Warning To Investors – This Is To Prepare For Tough Times Ahead

'Fighting Inflation With Financial Pain': Billionaire Ray Dalio Just Issued A Dire Warning To Investors — This Is To Prepare For Tough Times Ahead

‘Fighting Inflation With Financial Pain’: Billionaire Ray Dalio Just Issued A Dire Warning To Investors — This Is To Prepare For Tough Times Ahead

In August, US consumer prices rose 8.3% over the past year, down from June’s peak of 9.1%, but still alarmingly high.

And that doesn’t bode well for investors, according to Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates.

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“You’re fighting inflation with financial pain,” he tells MarketWatch’s Money Festival.

Dalio explains that when the Fed raises interest rates to tame inflation, the discount rate rises.

“When someone makes an investment, they pay a lump sum for future cash flows. And then to say what they’re worth, we take the present value of those, which you’re going to use a discount rate… and that’s what makes all the boats go up and down together.”

So where should investors hide?

Cash is obviously not optimal as inflation erodes its purchasing power. Dalio previously said that “cash is trash” and he still believes it.

“Cash will still have a negative real return, it will still be a wasteful investment, depending on how it compares to the others.”

Let’s take a look at what Dalio’s hedge fund owns.

Procter & Gamble (PG)

According to Bridgewater’s latest 13F filing with the SEC, the fund owned 6.75 million shares of Procter & Gamble at the end of June. With a market value of about $970 million at the time, it was the largest holding in Dalio’s portfolio.

This should come as no surprise. P&G is a defensive stock with the ability to deliver cash returns to investors in different economic environments.

In April, P&G’s board announced a 5% dividend increase, marking the company’s 66th consecutive annual increase in earnings. The stock currently offers an annual dividend yield of 2.7%.

It’s easy to see why the company is able to maintain such a streak.

P&G is a consumer staples giant with a portfolio of trusted brands such as Bounty paper towels, Crest toothpaste, Gillette razor blades and Tide detergent. These are products that households buy on a regular basis, regardless of what the economy is doing.

Johnson & Johnson (JNJ)

With deeply entrenched positions in the consumer health, pharmaceutical and medical device markets, healthcare giant Johnson & Johnson has delivered consistent returns to investors throughout economic cycles.

Many of the company’s consumer health brands—such as Tylenol, Band-Aid and Listerine—are household names. In total, JNJ has 29 products each capable of generating over $1 billion in annual sales.

Not only does Johnson & Johnson record recurring annual earnings, but it also grows them consistently: Over the past 20 years, Johnson & Johnson’s adjusted earnings have grown at an average annual rate of 8%.

JNJ announced its 60th consecutive annual dividend increase in April and now yields 2.7%.

As of June 30, Bridgewater owned 4.33 million shares of JNJ, worth about $769 million at the time and making the healthcare giant his second-largest holding.

iShares Core MSCI Emerging Markets ETF (IEMG)

Bridgewater’s third largest holding is the iShares Core MSCI Emerging Markets ETF.

IEMG tracks the MSCI Emerging Markets Investable Market Index and provides investors with comfortable exposure to stocks in emerging markets such as China, India and Brazil.

The ETF holds more than 2,600 stocks. Its top holdings include industry heavyweights such as chip giant Taiwan Semiconductor Manufacturing, Chinese technology behemoth Tencent Holdings and Indian multinational conglomerate Reliance Industries.

In a conversation with fellow investment legend Jeremy Grantham earlier this year, Dalio said he was looking at countries with good income situations and balance sheets that can weather the storm.

“Emerging Asia is very interesting. India is interesting,” he says.

Bridgewater owned 15.31 million shares of IEMG at the end of the second quarter, valued at $751 million.

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This article provides information only and should not be construed as advice. Provided without warranty of any kind.

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