A billionaire economist has warned that upcoming increases in federal interest rates will send the stock market down 20 per cent.
Ray Dalio, founder of investment firm Bridgewater Associates, joined expectations that the central bank will raise interest rates by another historic 75 percentage points, and that the year will end with rates at 4.5%.
It would be roughly double the current range of 2.25 and 2.5 percent, which is Dalio Wrote Shares will fall by a fifth as the three major indices on Wall Street have already seen a drop of more than 9 percent in the past month.
Dalio added that the negative outlook will affect all levels of the economy, including the 401 USD, which will witness a significant decline along with the stock market.
“This will lead to lower private sector credit growth, which will lead to lower private sector spending, and thus the economy with it,” he wrote.
Ray Dalio (above), the billionaire founder of investment firm Bridgewater Associates, has warned that projected federal increases in interest rates will send stocks down 20 percent.
Dalio and other economists believe that the central bank will raise interest rates by 0.75 percent sequentially in order to reach a rate of 4.5 percent by 2023.
The rises sent shockwaves through the stock market, with the Dow Jones Industrial Average down 9.34 percent over the past month alone.
The Federal Reserve raised interest rates this year after keeping them near zero during the pandemic in order to combat historically high rates of inflation.
In June and July, the central bank raised interest rates by 0.75 percent, the highest level in more than two decades, and many economists expect the Fed to raise rates for the third in a row by 0.75 percent in the coming weeks.
Many expected the increases would push the economy into a full-fledged recession next year, which the country is already technically going through after reporting negative GDP growth in the first two quarters of 2022.
And with a recession comes a stock market crash that will drastically affect retirement accounts.
Since the last report at the end of the second fiscal quarter in June, the balance has averaged $401,000 at $103,800, down about 15 percent from the previous quarter and down 30 percent from 2021.
Things got worse on Wall Street amid rising interest rates.
Last month, the Dow Jones Industrial Average fell more than 3,000 points, or 9.34 percent.
The Standard & Poor’s 500 Index also fell 9.58 percent, from 410 points, in the past month, with the Nasdaq index taking the biggest hit and falling 12.18 percent, or 1,644 points.
The S&P 500 is heading for its biggest annual loss since the Great Recession of 2008.
The S&P 500 fell 9.58 percent last month and is heading for its biggest annual loss since the Great Recession of 2008.
The Nasdaq index suffered the biggest losses this month, falling by 12.18 percent
Wall Street is expected to incur repeated losses as the nation risks a looming recession. Pictured: Traders look at prices at the New York Stock Exchange on Friday
Despite open fears of a recession, Federal Reserve Governor Christopher Waller supported the central bank in taking another 75 basis points, during a speech in Austria last week.
“I support a significant increase at our next meeting on September 20 and 21 to get the interest rate in a position that clearly constrains demand,” Waller said.
He said the Fed would continue to take ‘important steps’ to control policy, and added that rate hikes could continue as early as 2023.
Fed Chairman Jerome Powell had already kept the option open for an increase, which many bankers support in a desperate attempt to control inflation.
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