“ ‘A number of countries have done a much better job of dealing with the virus without inflating their budget deficits and printing money.’ ”
That’s Bob Prince, co-chief investment officer of the world’s largest hedge fund at Bridgewater Associates, explaining to Bloomberg in a recent interview why the U.S. is looking at “severely” limited economic growth even after the pandemic.
Going forward, he said, fiscal policy will continue to be the main source of stimulus, which will only serve to fuel the mounting pile of debt and put pressure on exchange rates. This is a problem around the world, too, but it’s more acute outside of Asia, according to Prince.
“Global investors tend to be very Western-centric,” he said. “A number of countries have done a much better job of dealing with the virus without inflating their budget deficits and printing money. “
Prince explained that China’s economy, for instance is “much closer to normal,” as are asset prices in much of Asia, which is something for investors to keep in mind.
“There is a substantial economic divergence between East and West,” he said. “As investors, you shouldn’t let yourself be completely locked into the West.”
Watch the full interview:
Meanwhile, the U.S. is in the midst of a relatively quiet stretch, in terms of the stock market and economy, according to Scott Minerd of Guggenheim Partners, who warned that could change in a big way heading in to the home stretch of the 2020 presidential election.
“The market’s performance and the economy’s recovery is calm compared to the volatility of March and April, but several issues concern me as the eyewall approaches,” he wrote in a note.
Minerd warned that while trillions of dollars pouring in from the Federal Reserve have helped to ease some of the big financial issues created by the coronavirus pandemic, there’s no shortage of uncertainties facing investors from here. “Without fiscal stimulus, personal income will stagnate, job gains will slow, consumers will pull back, and more small and medium-sized businesses will fail,” he explained. “The economic fallout from lack of fiscal actions increases the likelihood of a negative fourth quarter GDP print while Main Street remains in depression.”
Stocks continue to hold up even as investors have plenty of reason to be skittish. So far this month, the Dow Jones Industrial Average DJIA, -0.09% has added 2.2%, as has the S&P 500 SPX, +0.34%. The tech-heavy Nasdaq Composite Index COMP, +0.36% has fared even better, gaining 3.1%.