Ray Dalio says watch out for rates hitting this level as Wall Street stocks will take a 20% hit

Ray Dalio says watch out for rates hitting this level as Wall Street stocks will take a 20% hit

After that CPI shock earlier in the week, Wall Street is bracing for a fresh batch of data, including retail sales, on Thursday with a growing inversion in the yield curve between 2- and 10-year bonds. giving increasingly bleak economic signals. There is good news, however, as a disastrous rail strike could be averted.

There is little to cheer billionaire investor and hedge fund manager Ray Dalio who, in our call of the day says the Fed has no choice but to keep raising interest rates, at a high price for stocks.

And he makes some pretty specific guesses. “I estimate that a rate hike from where they are at around 4.5% will produce a negative impact of around 20% on stock prices,” Dalio said in a LinkedIn post dated Tuesday.

Some predict that the Fed could raise interest rates by 100 basis points next week, a move not seen since the equally inflationary 1980s. The central bank’s short-term rate hovers between 2.25% and 2.5%, but Nomura, for its part, sees that rate heading towards 4.75% by 2023.

But Dalio thinks interest rates could even reach the upper end of a range of 4.5% to 6%. “This will reduce private sector credit growth, which will lead to lower private sector spending, and therefore the economy with it,” he says.

Behind this prediction is the belief of the founder of Bridgewater Associates that the market seriously underestimates where inflation will end – at 2.6% over the next 10 years against what he sees as 4.5% to 5%. in the medium term, barring shocks.

Lily: Why a single U.S. inflation report rocked global financial markets — and what comes next

As for what happens when people start losing money in the markets – the so-called “wealth effect” – he expects less spending as they and their lenders become more cautious.

“The bottom line is that it seems likely to me that the inflation rate will stay significantly higher than people and the Fed want it to be (while the year-over-year inflation rate will come down) , that interest rates will rise, that other markets will fall and that the economy will be weaker than expected, and this without taking into account the tendencies of worsening internal and external conflicts and their effects.

The steps

ES00 Equity Futures


became mixed, with Treasury yields BX:TMUBMUSD10Y

climbing and the dollar DXY
reducing some.

CL Oil Price
lean south, alongside gold GC00.
China Stocks CN:SHCOMP

Hong Kong: HSI
slipped after the country’s central bank left rates unchanged. European natural gas prices GWM00
are on the rise again. BitcoinBTCUSD
is trading at just over $20,000.

The buzz

Union Pacific UNP Stock,
South Norfolk NSC
are rallying in premarket after the White House announced it had reached a tentative railroad deal with unions. No deal by Friday would mean strikes and havoc for supply chains, grain markets and even the holidays ahead. Learn more here.

In addition to August retail sales, we will have weekly jobless claims, Philly Fed and Empire State manufacturing indices and import prices. Industrial production and business inventories will follow.

Adobe shares ADBE
are down after a report that the software company is mulling a $20 billion deal to buy graphic design startup Figma.

Vitalik Buterin, one of the co-founders of Ethereum, claims that the so-called merger is over, which means the birth of more environmentally friendly crypto. Ethereum ETHUSD
is just a little right now.

New lawsuit claims Tesla TSLA
made false promises about autopilot and full self-driving features. And move on Tesla, Apple AAPL
is now the biggest short bet on Wall Street.

Ericsson Eric


is down after a double downgrade at Credit Suisse, which cited inflationary headwinds. Analysts lifted Nokia FI:NOKIA

to outperform, although the stock barely moves.

Cathie Wood’s Ark Investment Management went on a buying spree after Tuesday’s market crash, picking up mostly Roku ROKU.

Opinion: Pinterest never thought of itself as a social network. So far.

Patagonia billionaire Yvon Chouinard is donating his entire business – worth $3 billion – to the fight against climate change.

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