“The pain will continue”

Ray Dalio, Bridgewater Associates, Founder, Co-Chair and Co-Chair of Information Technology, at the WEF in Davos, Switzerland, on May 24, 2022.

Adam Galicia CNBC

Billionaire investor Ray Dalio is right to bet against European stocks, and global markets still have a hard time, according to Beat Whitman, a partner at Zurich-based Porta Advisors.

Dalio’s Bridgewater Associates has at least $ 6.7 billion in short positions against European stocks, according to Breakout Point, which summarizes the company’s public announcements. It is not known whether Bridgewater’s shorts are outright bets on stocks or part of a hedge.

Europe’s 22 short-term goals for the Connecticut-based fund include a $ 1 billion bet against Dutch semiconductor equipment supplier ASML Holding$ 705 million against France TotalEnergies and $ 646 million against the French drugmaker Sanofi, according to Breakout Point. Other big names, also short for the company, include Santander, Bayer, AXA, ING Group and Allianz.

“I think he’s on the right side of the story and it’s very interesting to see which strategies have performed best this year,” Whitman of Porta told CNBC on Friday.

“These are mainly quantitative strategies that follow the trend, which have performed very strongly – not surprisingly – and the interesting thing is that the strategies for a short and long time were quite catastrophic and of course, needless to say that only long-term are the worst , so I think it’s right now that he’s on the right side of this investment strategy. “

The pan-European Stoxx 600 The index has fallen more than 16% since the beginning of the year, although it has not suffered the same level of pain as Wall Street.

However, Europe’s proximity to the conflict in Ukraine and the related energy crisis, along with global macroeconomic challenges related to high inflation and supply chain problems, have led many analysts to lower their prospects for the continent.

“The fact that all these shorts appeared within a few days shows activity related to the index. In fact, all the shorted companies belong to the STOXX Europe 50 index,” said Breakout Point founder Ivan Kosovic.

“If this is indeed the strategy for the STOXX Europe 50 index, it would mean that other components of the index are also short, but are currently below the 0.5% disclosure threshold. We do not know to what extent these disclosures may be a completely short bet and to what extent hedging against a particular exposure. “

Dalio’s company as a whole is a sword in the global economy and has already done so is positioned against sales in US bondsAmerican stocks and American and European corporate bonds.

“I don’t think we’re near the bottom.”

Despite what appeared to be a slight relief on Friday, Whitman agreed that the picture of global stock markets could worsen before it improves.

“I don’t think we are close to any bottom in the general indices and we can’t compare the average declines in the last 40 years, when we had a mainly deinflationary trend of [Paul] It’s time for Walker, “he said.

Walker was chairman of the US Federal Reserve between 1979 and 1987 and introduced a sharp rise in interest rates, widely acknowledged to end the high inflation that persisted in the 1970s and early 1980s, although unemployment rose. to almost 11% in 1981

“We have a really complicated macro-situation at the moment, unstable inflation rates and if you just look at the fact that in the US market we have a long treasury below 3.5%, unemployment below 4%, inflation above 8% – real interest rates have hardly moved.” Whitman added.

“If you look at risk indicators like volatility index, credit spreads, default rates, they haven’t even disappeared by half where they need to be to form a proper bear market bottom, so there’s still a lot of debt reduction. “

Lots of losing technology stocks, “mem shares“And cryptocurrencies have sold out sharply since central banks began to curb inflation, but Whitman said there was more to come for the wider market.

“A lot of the heat is settling right now, but I still think the main indicators here are the high-yield debt spreads and default rates, and they just haven’t reached an area that’s interesting to invest at every stage, so the pain it will take a long time. “

Related Posts

Leave a Reply

Your email address will not be published.