West Port, CT - Greg Jensen, co-chief investment officer of Bridgewater Associates, the largest hedge fund in the world, is forecasting “significantly weaker, near-recession-level growth” next year.
In a telephone interview on Thursday, Jensen said financial markets are “not pricing in” 2019 U.S. growth close to 1 percent and gross domestic product a “little bit lower” for the rest of the developed world next year.
“The biggest theme developing is that you are going to have significantly weaker growth, near recession level growth in 2019, based on our measures, and the markets are generally not pricing that in,” said Jensen, who helps oversee more than $160 billion in assets.
“Although the movement has been in that direction, the degree of it is still small relative to what we are seeing in terms of the shifts in likely economic conditions. And so, we think that’s going to be the big story going forward, weaker growth and central banks struggling to move from their current tightening stance to easing and finding it difficult to ease because they have very little ammunition to ease.”
Jensen said all of this against the backdrop of a secular backdrop of political tensions across most of the developed world and “a cyclical downturn will just heighten those tensions and worsen de-globalization.”
The Federal Reserve on Wednesday largely adhered to its plan for more rate hikes over the next two years and kept its balance sheet reduction plan on “autopilot,” though spooking investors already worried about slowing economic growth.
On Thursday, the Nasdaq Composite index slumped to the brink of a bear market, finishing almost 20 percent off its August record. The S&P 500 is down more than 10 percent in December, on track for its worst month of the record bull run.
“We anticipate surprisingly weaker growth in most of the developed world, particularly for the U.S., generally close to recession levels, close to 1 percent and little bit lower for the rest of the developed world next year,” Jensen said. “And the picture for profits is even more significantly bearish, so we think growth will slow and profits will slow significantly more than growth will slow.”
Jensen, 43 has amassed fortunes of at least $1 billion, according to an analysis by the Bloomberg Billionaires Index, largely thanks to the rising value of the world’s largest hedge fund firm, which topped $16 billion at the end of 2017.