The Fed’s aggressive price hikes have forged a large shadow over the inventory market. Among the many consultants who’re sounding the alarm is Ray Dalio, founding father of the world’s largest hedge fund Bridgewater Associates.
In a LinkedIn submit in June, Dalio warns that Fed’s tightening might result in stagflation – an financial situation marked by excessive inflation, however with out the strong financial development and employment that often include it.
“[O]ver the long term the Fed will almost definitely chart a center course that may take the type of stagflation.” And lately, Bridgewater’s co-chief funding officer Greg Jensen advised Bloomberg that the Fed’s hawkish stance nonetheless hasn’t been absolutely priced in.
“In mixture, as an instance asset markets decline at one thing like 20% to 25%,” he predicts.
If you’re questioning what to do given this gloomy outlook, right here’s a take a look at a number of the largest holdings at Dalio’s hedge fund.
Vanguard FTSE Rising Markets ETF (VWO)
Based on Bridgewater’s newest 13F submitting to the SEC, the fund held 15.43 million shares of Vanguard FTSE Rising Markets ETF on the finish of June. With a market worth of round $643 million on the time, VWO was the seventh-largest holding in Dalio’s portfolio.
VWO tracks the FTSE Rising Markets All Cap China A Inclusion Index and supplies buyers with handy publicity to shares in rising markets like China, Brazil, and South Africa.
The ETF holds greater than 5,000 shares. Its high holdings embody trade heavyweights like chipmaking large Taiwan Semiconductor Manufacturing, Chinese language tech behemoth Tencent Holdings, and Indian multinational conglomerate Reliance Industries.
In a current dialog with one other investing legend, Jeremy Grantham, Dalio stated he’s nations with good earnings statements and steadiness sheets that may climate the storm.
“Rising Asia may be very fascinating. India is fascinating,” he provides.
Procter & Gamble (PG)
Bridgewater’s largest holding is a defensive inventory with the flexibility to ship money returns to buyers in several financial environments: Procter & Gamble.
In April, P&G’s board introduced a 5% dividend enhance, marking the corporate’s 66th consecutive annual payout enhance. The inventory presently presents an annual dividend yield of two.6%.
It’s straightforward to see why the corporate is ready to keep such a streak.
P&G is a shopper staples large with a portfolio of trusted manufacturers like Bounty paper towels, Crest toothpaste, Gillette razor blades, and Tide detergent. These are merchandise that households purchase frequently, no matter what the financial system is doing.
Johnson & Johnson (JNJ)
With deeply entrenched positions in shopper well being, prescribed drugs and medical units markets, healthcare large Johnson & Johnson is one other identify that has supplied constant returns to buyers all through financial cycles.
Most of the firm’s shopper well being manufacturers — similar to Tylenol, Band-Assist, and Listerine — are family names. In whole, JNJ has 29 merchandise every able to producing over $1 billion in annual gross sales.
Not solely does Johnson & Johnson submit recurring annual earnings, however it additionally grows them constantly: Over the previous 20 years, Johnson & Johnson’s adjusted earnings have elevated at a mean annual price of 8%.
JNJ introduced its sixtieth consecutive annual dividend enhance in April and now yields 2.7%.
As of June 30, Bridgewater held 4.33 million shares of JNJ, value roughly $769 million on the time and making it the fund’s second-largest holding.
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