Tags: ray dalio | rate | hikes | asset | prices

Ray Dalio: Rates Hikes 'Hurting Asset Prices'

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Thursday, 15 November 2018 09:29 AM

Billionaire investor Ray Dalio said the Federal Reserve’s interest-rate hikes have hurt asset prices.

"We've raised interest rates to a level that it's hurting asset prices," the founder of Bridgewater Associates told CNBC. "We're in a situation right now that the Fed will have to look at asset prices before they look at economic activity. It's a difficult position," he said.

Dalio doesn’t believe the central bank needs to raise rates so it would have room to make cuts if the economy were to take a major downturn. "That sounds like pretty bad logic to me," he said.

For his part, Fed Chairman Jerome Powell said a “really strong” U.S. economy is likely to continue growing, but softness in housing and high levels of corporate debt have caught the central bank's eye.

Powell, quizzed by Dallas Federal Reserve President Robert Kaplan in an hour-long conversation, was not asked directly about possible further rate increases, but said nothing to counter the expectation that the Fed will raise rates again when it meets in December, Reuters reported.

However he did enumerate a set of concerns that have begun to arise among Fed officials as they debate how much further and how fast to raise their short-term policy rate, a benchmark for other borrowing costs in the economy.

“Slowing growth abroad. The tax cuts and spending increases that were enacted are providing some real boost right now, but that impetus is going to wear off over time,” Powell said when asked to list the “headwinds” the economy may face in coming months.

The Fed raised rates at its September meeting, and Powell at the time mapped out an optimistic view of unemployment likely to continue at record low levels, growth continuing, and inflation near the central bank’s 2 percent target.

Dalio isn't alone in his apprehension about the market.

With repeated rallies in U.S. stocks failing to take hold, UBS Group AG joined other Wall Street firms in scaling back its optimism.

Keith Parker, the bank’s head of U.S. equity strategy, reduced his year-end forecast for the S&P 500 to 2,875 from 3,150, citing a faster-than-expected contraction in stock valuations, Bloomberg reported.

While a cooling in U.S.-China trade tension may help fuel a December rally, more record highs are unlikely until next year. He predicted the index will finish 2019 at 3,200, up about 19 percent from now.

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Billionaire investor Ray Dalio said the Federal Reserve's interest-rate hikes have hurt asset prices.
ray dalio, rate, hikes, asset, prices
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2018-29-15
Thursday, 15 November 2018 09:29 AM
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