Ray Dalio: Investors have overreacted, markets will recover soon

12 Feb, 2020 06:09
source: Singularity Financial

Ray Dalio, the billionaire founder of Bridgewater Associates, which manages $160 billion in global investments, says the impact of the coronavirus outbreak on markets has been exaggerated and is likely to be short lived.

Investor concerns over the pandemic “probably had a bit of an exaggerated effect on the pricing of assets because of the temporary nature of that, so I would expect more of a rebound,” Dalio, said at a conference in Abu Dhabi on Tuesday. “It most likely will be something that in another year or two will be well beyond what everyone will be talking about.”

According to Bloomberg report by Nicolas Parasie, Dalio said investors should instead focus on issues such as wealth and political gaps, the emergence of China — and what that means for the competitive landscape — technology and the environment.

Some Wall Street bulls say they fear the virus could lead to a stock market correction and that it currently poses the single biggest threat the market’s rally. Coronavirus has shut down business across the Chinese provinces that account for more than 80% of GDP and 90% of exports for the world’s second-largest economy as the government instructs workers to stay home in an effort to contain the outbreak.

“When you don’t know, the best investment strategy is to be smartly diversified across geographic locations, across asset classes, and across currencies,” Dalio recently wrote in a LinkedIn post.

Dalio said fears of the spreading coronavirus have triggered a “flight-to-quality market action” that continues to pressure stocks while giving a lift to hedges such as gold, bonds and the dollar.

“We want to pay attention to what’s actually happening, what people believe is happening that is reflected in pricing (relative to what’s likely), and what indicators that will indicate the reversal,” wrote Dalio, who’s made more money for his clients since 1975 than any other hedge fund, according to Bloomberg.