The United States has already entered a recession after a decline in GDP for two consecutive quarters. Many analysts even believe we are still not in a recession because unemployment is going down and the economic situation isn’t very bad. However, the CIO of Bridgewater, Karen Karniol-Tambour, talked about an unprecedented recession as she warns investors of the difficult times ahead. Karen said, “The dam has been broken where fiscal policymakers are now part of the story.”
This recession is going to be extremely painful
The Chief Investment Officer of Bridgewater Associates recently warned investors that the recession that is cooking now is going to be much different than anything before. Considering this statement comes from the CIO of the largest hedge fund globally with $130 billion in AUM, we gotta take it seriously. Karen was recently interviewed by Bloomberg, where she shared her opinion on recession and the possible economic risks this decade.
She said that we might see a recessionary period that is deeper and longer and something that we are not accustomed to. So, how is it different from previous times? Well, earlier, the Central Banks could just ease the market, drop interest rates and voila, the recession is gone. However, this time that won’t be possible because the recession is actually brewing because the feds are raising interest rates to curb inflation.
Karen stated that it all started with COVID-19 when the authorities got deeply associated with solving the current problem. Since they are part of the story now, things will be different, and they will step in to do everything they possibly can. She explained, “Monetary policy, on the one hand, will be less important because fiscal will be doing what it’s doing. On the other hand, they’re going to be in an even tougher spot because they’ll have much more entrenched inflation because of secular inflationary pressures and fiscal policymakers stimulating at the same time.”
Other variables in the mix
The CIO of Bridgewater believes that one cannot just rely on the market and the authorities need to take control. At the same time, US’s relationship with China will also play a big role because they play an important part in supply chains. Cutting them out or trying to do so from the global economy could cause a major inflationary event.
What are your thoughts as the Bridgewater CIO warns investors about an unprecedented recession? And do you think the US will be able to manage it somehow? Let us know in the comments below. And, if you found our content informative, share it with your family and friends.
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