Concerns over Consequences of Fed Moves

The world’s biggest hedge fund is scared that a U.S. interest rate hike later this year will send markets into a 1937-style tailspin, but experts told CNBC that they aren’t too concerned.

In a note to clients that was widely-discussed on Tuesday, Ray Dalio, founder of the $165 billion hedge fund Bridgewater Associates, raised concerns that a Federal Reserve rate hike in June or September could create a market rout similar to the one seen in 1937.

Bridgewater highlighted several similarities between current financial market conditions and 1937: The economy is rebounding, interest rates are at zero and asset prices are enjoying a strong rally. In 1937, the U.S. central bank tightened monetary policy under the belief that the downturn arising from the 1929 Great Depression was over, but its actions tipped the country back into a recession and saw the Dow Jones Industrial Average lost half its value in a year.

CNBC

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.