Ray Dalio’s Bridgewater predicts another 20% to 25% drop for the markets — here’s what the asset manager still holds for shockproofing
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The Fed’s aggressive rate hikes have cast a giant shadow over the stock market. Among the alarming experts is Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund.
In a June LinkedIn post, Dalio warns that Fed tightening could lead to stagflation — an economic condition marked by high inflation but without the accompanying strong economic growth and employment.
“[O]Longer term, the Fed is most likely to envision a middle course that will come in the form of stagflation.” And recently, Bridgewater chief investment officer Greg Jensen told Bloomberg that the Fed’s hawkish stance still hasn’t fully priced in.
“Generalized, let’s say the property market will fall by about 20 to 25 percent,” he predicts.
If you’re wondering what to make of this bleak outlook, here’s a look at Dalio’s hedge fund’s biggest holdings.
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Vanguard FTSE Emerging Markets ETF (VWO)
According to Bridgewater’s most recent 13F filing with the SEC, the fund held 15.43 million shares of the Vanguard FTSE Emerging Markets ETF at the end of June. At the time, VWO was the seventh largest holding in Dalio’s portfolio, with a market value of approximately USD 643 million.
VWO tracks the FTSE Emerging Markets All Cap China A Inclusion Index and provides investors with convenient exposure to stocks in emerging markets such as China, Brazil and South Africa.
The ETF holds more than 5,000 shares. Its largest holdings include industry heavyweights such as chip giant Taiwan Semiconductor Manufacturing, Chinese tech giant Tencent Holdings and Indian multinational conglomerate Reliance Industries.
In a recent conversation with another investing legend, Jeremy Grantham, Dalio said he’s looking at countries with good income statements and balance sheets that can weather the storm.
“Emerging Asia is very interesting. India is interesting, he adds.
Procter & Gamble (PG)
Bridgewater’s largest holding is a defensive stock that can provide cash returns to investors in a variety of economic environments: Procter & Gamble.
In April, P&G’s board announced a 5% dividend increase, the company’s 66th consecutive annual payout increase. The stock currently offers an annual dividend yield of 2.6 percent.
It’s easy to see why the company is able to maintain such a streak.
P&G is a consumer staples giant with a range of trusted brands such as Bounty paper towels, Crest toothpaste, Gillette razor blades and Tide detergents. These are products that households buy regularly, regardless of how the economy is doing.
Johnson & Johnson (JNJ)
Healthcare giant Johnson & Johnson, with deep-rooted positions in consumer healthcare, pharmaceuticals and medical devices, is another name that has provided consistent returns to investors through the cycles.
Many of the company’s consumer health brands – such as Tylenol, Band-Aid and Listerine – are household names. In total, JNJ has 29 products, each of which has the potential to generate more than $1 billion in annual sales.
Not only does Johnson & Johnson post recurring annual profits, it also keeps growing them: Over the past 20 years, Johnson & Johnson’s adjusted earnings have grown an average of 8% per year.
In April, JNJ announced its 60th consecutive annual dividend increase and now yields 2.7%.
As of June 30, Bridgewater owned 4.33 million JNJ shares, worth about $769 million at the time, making it the fund’s second-largest holding.
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This article provides information only and should not be considered advice. It is supplied without any warranty whatsoever.