The Fed’s aggressive rate hike has cast a heavy shadow on the stock market. Among the experts to sound the alarm is Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund.
In a LinkedIn post in June, Dalio warned that the Fed’s tightening could lead to a stagflation — an economic condition marked by high inflation, but without the strong economic growth and jobs that usually come with it.
,[O]Over the long term, the Fed will most likely chart a medium course that will take the form of a stagflation. And earlier this week, Bridgewater’s co-chief investment officer Greg Jensen told Bloomberg that the Fed’s aggressive stance is still not fully priced.
“Overall, let’s say the asset market is down 20% to 25%,” he predicts.
if you are thinking What to do given this gloomy outlookHere’s a look at some of the biggest holdings in Dalio’s hedge funds.
Vanguard FTSE Emerging Markets ETF (VWO)
At the end of June, the fund held 15.43 million shares of the Vanguard FTSE Emerging Markets ETF, according to Bridgewater’s latest 13F filing to the SEC. With a market value of approximately $643 million at the time, VWO was the seventh largest holding in Dalio’s portfolio.
The VWO tracks the FTSE Emerging Markets All Cap China A Inclusion Index and provides investors with convenient exposure to stocks in emerging markets such as China, Brazil and South Africa.
There are more than 5,000 stocks in the ETF. Its top holdings include industry giants such as chipmaking giant Taiwan Semiconductor Manufacturing, Chinese tech behemoth Tencent Holdings and Indian multinational conglomerate Reliance Industries.
In a recent conversation with another investment giant, Jeremy Grantham, Dalio said he is looking at countries with good income statements and balance sheets that can weather the storm,
“Emerging Asia is very interesting. India is interesting,” he added.
Procter & Gamble (PG)
Bridgewater’s largest holding is a defensive stock with the potential to deliver cash returns to investors in a variety of economic environments: Procter & Gamble.
In April, P&G’s board announced a 5% dividend increase, marking the company’s 66th consecutive annual payout increase. The stock currently offers an annual dividend yield of 2.5%.
It’s easy to see why the company has been able to maintain such a streak.
P&G is a consumer staples giant with a portfolio of trusted brands such as Bounty paper towels, Crest toothpaste, Gillette razor blades and Tide detergent. These are products that families buy regularly, regardless of what the economy is doing.
Johnson & Johnson (JNJ)
With a deep position in the consumer health, pharmaceuticals and medical devices markets, healthcare giant Johnson & Johnson is another name that has provided Consistent returns to investors throughout economic cycles,
Many of the company’s consumer health brands — such as Tylenol, Band-Aid and Listerine — are household names. In total, JNJ has 29 products, each capable of generating over $1 billion in annual sales.
Johnson & Johnson not only posts recurring annual profits, but it also grows them steadily: Over the past 20 years, Johnson & Johnson’s adjusted earnings have grown at an average annual rate of 8%.
JNJ announced its 60th consecutive annual dividend increase in April and now yields 2.7%.
As of June 30, Bridgewater held 4.33 million shares of JNJ, worth approximately $769 million at the time, and was the fund’s second largest holding.
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