Speaking at the Bloomberg Global Asset Owners Forum recently, Ray Dalio sounded the alarm on central bank intervention in economies. Bloomberg reports:
“Today the economy and the markets are driven by the central banks and the coordination with the central government,” said Dalio, speaking at the Bloomberg Global Asset Owners Forum on Thursday. As a result, “capital markets are not free markets allocating resources in traditional ways.”
The Covid-19 pandemic brought economic activity to a standstill and sent markets spiraling downward in March. The Federal Reserve’s unprecedented multi-trillion dollar response eased concerns and helped fuel a shock recovery in financial markets even as the U.S. economy continues to struggle.
Dalio said the U.S. now has the worst wealth gap since the 1930s, adding that central banks will need to continue to pump money into the economy.
“You’re going to see central bank balance sheets explode, they have to because the choice is the sinking ship,” he said.
Dalio also said that investors should favor stocks and gold over bonds and cash because the latter offer a negative rate of return and central banks will print more money.
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