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Hedge Fund Big Dog Is Worried


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What's going on?

Ray Dalio, the founder of the world’s biggest hedge fund, just said it’s time for investors to be cautious, and the market appears to be listening…

What does this mean?

The billionaire is concerned that the political drama in the US will hinder the government’s ability to function and that this will weigh on markets, which have already been shaky recently. He went so far as to compare the current situation to 1937, when the US was in the midst of the Great Depression.

Dalio’s hedge fund is turning relatively more defensive in its investments; this typically means putting money in things that are perceived to be safer, like government bonds or gold.

Why should I care?

The bigger picture: This is yet another pessimistic sign for the markets in an ominous month.
This month we have seen Trump’s CEO advisory councils disbanded which has prompted market worries about the feasibility of passing tax reform as well as nuclear brinkmanship between the US and North Korea. US stocks have dipped nearly 2%. Furthermore, Dalio is now the third major money manager to recommend shifting to lower risk investments. Something’s afoot, and it doesn’t look good for the economy or for markets.

For markets: Investments that are perceived as “safer” are seemingly gaining popularity with prominent money managers.
So, what is the rationale behind them shifting their investment strategies? Gold and government bonds are two examples of perceived safe haven investments and their prices have typically risen in times of crisis. Gold because it is a fungible and durable metal that acts as a store of value, and government bonds because the government is seen as more reliable than businesses that are making less money in times of turmoil.

Originally posted as part of the Finimize daily email.

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