The hedge fund was founded by Ray Dalio.
The person is Kim White/Getty Images.
The Federal Reserve's tightening of monetary policy in the year 2022, should not derail the economic expansion, but is likely to weigh heavily on "bubble-type" tech stocks, according to billionaire investor Ray Dalio.
The strongest inflation in 39 years has the Fed planning to hike interest rates.
The fed funds rate is expected to be between 0.05% and 1% by the end of the year, according to the FedWatch tool.
Although raising rates is a delicate business, it shouldn't hurt the economy, according to the founder of the world's biggest hedge fund.
He said on the "Closing Bell" show that in the third year of the cycle, it's not enough to send the cycle down. He said that it was the beginning of the testing of the Fed's brakes.
"If you understand the short-term cycle, this is typically a seven-year type of cycle in terms of expansions and recessions, so it could send financial asset prices lower, but I would expect that," he said.
The world's leading private bankers for the ultra-rich advise a next-gen client base they say is the most aggressive and confident they've seen.
The more speculative corners of the stock market are likely to be affected by the Fed's actions.
He noted that some tech stocks have experienced a bubble-type of behavior and said that they would likely be hit by rising rates.
Higher interest rates are bad for unprofitable tech stocks as they aren't likely to start earning until the future, meaning holders lose out on returns here and now. That makes bonds and other investments look more attractive.
Tech stocks have been knocked out of the picture this year, with the tech-heavy Nasdaq 100 tumbling 3% Wednesday in its biggest fall since March. The Innovation ETF has fallen 12% so far this year, seen as a proxy for unprofitable tech companies.
"This is not an environment that's good for those types of investments," he said.
He said investors may want to consider buying inflation-indexed bonds or gold to protect themselves against price rises.
Business Insider has an original article.
