Ray Dalio sees the Federal Reserve hiking to 4.5%, so stocks will drop 20%

Ray Dalio, founder of Bridgewater on what he sees ahead:

  • “It looks like interest rates will have to rise a lot (toward the higher end of the 4.5% to 6% range)”
  • “This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it.”
  • will in turn see equity prices dropping nearly 20%

Dalio has posted the piece online, you can read the whole thing here. 

Fitch Ratings “deep and wide cuts to global GDP forecasts”

  • expects world GDP to grow by 2.4% in 2022 – revised down by 0.5pp since the June GEO – and by just 1.7% in 2023, a cut of 1%
  • eurozone and UK are now expected to enter recession later this year
  • the US will suffer a mild recession in mid-2023
  • “We’ve had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China”
  • The forecast now assumes a full or near complete shut-off of Russian pipeline gas to Europe.

Fitch rating agency revises Australia's outlook to negative (was previoulsy 'stable'), affirms ratin

Stocks recover higher into the close in an up and down day

The US major indices recovered into the close and are ending the day higher but was a up and down trading session. The gains come after sharp declines yesterday that saw the Dow, S&P, and NASDAQ at its worst trading day since June 2020.

For the trading week, the Dow industrial average is down -3.14%, the S&P is down -2.98% and the NASDAQ is down -3.24%. However, all 3 indices are above their lows from last week (recall day all moved up 4 consecutive days before yesterday’s sharp fall).

The final numbers are showing:

  • Dow industrial average rose 30.12 points or 0.10% at 31135.08
  • S&P index rose 13.34 points or 0.34% at 3946.02
  • NASDAQ index rose 86.11 points or 0.74% at 11719.69
  • Russell 2000 rose 6.80 points or 0.3% at 1838.46

6 of the 11 sectors of the S&P saw gains while 5 declined:

  • energy rose 2.85%
  • consumer discretionary rose 1.3%
  • utilities rose 0.81%

The laggards today included:

  • real estate which fell -1.39%
  • materials which fell -1.23%
  • financials which fell -0.25%
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