As the world faces more than $11 trillion in negative-yielding debt, Dalio said central banks like the Fed, the European Central Bank and the Bank of Japan are facing a dilemma. That’s already keeping a lid on inflation, and may be somewhat keeping the economy from overheating.
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Dalio warned that hiking is a “risky thing” to do, as it is now not priced into the Treasury yield curve.
“We’re in a world where bad things happen”, said former Treasury Secretary Tim Geithner at CNBC’s Delivering Alpha Conference on Tuesday.
The latest addition to those raising red flags over central bankers’ inability to stimulate growth by using the monetary tools is the head of Bridgewater Associates, Ray Dalio, who says the debt market is in a “dangerous situation”. Wall Street now puts low odds on an interest rate hike in 2016.
Like Ray Dalio, Gross has also been very critical of ultra-loose central bank policies, saying such actions have hindered economic growth instead of creating more jobs, as well as have kept so-called “zombie corporations” alive. “And I don’t think they are paying enough attention to how markets react”.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Market-implied probability indicates that the Fed won’t hike until at least December.
Dalio also highlighted the overall riskiness of everything and said diversification is the only strategy.
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Geithner’s was the more optimistic take with the predicted growth rate of 2.25%.
