The COVID-19 Shock and New Investment Paradigm
The COVID-19 crisis has created a significant impact on people's lives. For investors, it has also accelerated the transition into a new paradigm of zero interest rates and coordinated monetary and fiscal policy. Explore our research on how we got here and how to navigate this new environment.
The New Paradigm and How We Got Here
Prior to the pandemic was an economic context of demanding secular conditions: developed economies in the latter stages of their long-term debt cycles and rising internal and external conflict. What we have now is a collapse in global income caused by a pandemic, with interest rates at zero. Everything follows from the interaction of these three conditions, and this has accelerated a paradigm shift to which investors must now adapt.
June 24, 2020
As part of the Bloomberg Invest Global virtual summit, Co-CIO Bob Prince spoke with Jonathan Ferro of Bloomberg TV about the impact of the coronavirus pandemic on the economy and global markets, as well as what recovery efforts might look like.
June 8, 2020
As policy makers respond to the COVID-19 pandemic with coordinated monetary and fiscal measures of unprecedented size and scope, they are faced with two risks: deflation as a result of too little action, and stagflation as a result of doing too much. Senior Portfolio Strategist Jim Haskel and Co-CIO Greg Jensen discuss our global outlook, the challenges policy makers face in this environment, and prospects for either deflation or inflation.
May 28, 2020
The economic downturn and policy response resulting from the COVID-19 shutdowns are different than in past recessions, as a collapse in income, rather than credit, drove the collapse in spending. Co-CIO Greg Jensen and Jason Rogers from our research team examine the holes that this has created in the real economy and asset markets as well as the challenges policy makers are likely to face when filling them.
April 23, 2020
In conversation with Senior Portfolio Strategist Jim Haskel, Co-CIO Bob Prince examines the forces COVID-19 unleashed on the economy, the measures that will be required to restart the flywheel between income and spending, and the range of ways the shock is impacting different countries, sectors, and companies.
April 27, 2020
The coronavirus will have meaningful implications for economic activity and the range of possible outcomes is almost unimaginably wide. Co-CIO Greg Jensen and our research team consider the range of plausible economic outcomes and how Bridgewater is taking that range of outcomes into account.
March 22, 2017
Populism is not well understood because, over the past several decades, it has been infrequent in emerging countries and virtually nonexistent in developed countries. It is one of those phenomena that comes along in a big way about once a lifetime — like pandemics, depressions, or wars. The last time that populism existed as a major force in the world was in the 1930s, when most countries became populist. Over the last year, it has again emerged as a major force. This report is an examination of populism, the phenomenon — how it typically germinates, grows, and runs its course.
October 23, 2017
Today, wealth and income skews are so great that average statistics no longer reflect the conditions of the majority of Americans. To give you a sense of what the picture below the averages look like, we broke the economy into two economies — that of the top 40% and that of the bottom 60%.
Investing in the New Paradigm
The current conditions imply an acute need to understand the following key drivers of future investment outcomes: Reflation, storeholds of wealth and diversification, and differentiated outcomes across markets, economies, and companies.
We invite you to explore excerpts from our 2021 Global Outlook, in which we lay out the key dynamics in markets and economies that we think will be particularly important in the coming years. We explore how the COVID-19 crisis has accelerated the transition into a new paradigm of zero interest rates, coordinated monetary and fiscal policy, and heightened internal and external conflict — and what this means for economies, markets, and investors.
December 4, 2020
In a comprehensive interview with Barron’s, Director of Investment Research Karen Karniol-Tambour discusses the trends that will dominate the post-pandemic investment world, including diversification with interest rates at zero, the increasing power of fiscal policy, and what China’s latest five-year plan means for investors.
November 17, 2020
Co-CIO Greg Jensen joined Reuters’ “The Exchange” podcast with Anna Szymanski to discuss the paradigm shift the US faces as the era of monetary policy dominance ends and fiscal action becomes the major driver of growth. Greg describes the macroeconomic landscape, geopolitical tensions, and storeholds of wealth, encouraging investors to rethink their approach to asset classes.
Following Recent Good News on the Vaccine, There Are the Facts, Perspective, and Still More Uncertainty
November 10, 2020
On the heels of promising vaccine news, we share perspective on the news itself and its ripple across markets. Chief Administrative Officer Richard Falkenrath and Head of COVID Task Force Kiran Rao discuss how the news is significant and the broader state of the pandemic right now. Richard is a former senior White House official who was at the center of the response to the SARS outbreak, and Kiran is a medical doctor who has previously done significant epidemiology work with the Gates Foundation and World Health Organization.
September 18, 2020
In a recent appearance on Bloomberg TV, Bridgewater’s Director of Investment Research Rebecca Patterson discusses how to achieve diversification and balance in a zero-rate environment, the differentiated outcomes seen across economies in response to the pandemic, and drawing lessons from Japan to think about the Fed’s latest policy shift and what it might mean for inflation.
September 10, 2020
Is the gold rally behind us? Why hold an asset that doesn’t offer any yield? Is it really wise to add exposure to such a small market? Greg Jensen and our research team address these questions, share some perspective on gold, and explore its unique role in protecting portfolios in the new paradigm — a world of ongoing pressure for policymakers across the globe to print and spend, zero interest rates that make bonds more or less dead weight, tectonic shifts in where global power lies, and conflict.
August 14, 2020
In an interview with Bloomberg TV, Director of Investment Research Karen Karniol-Tambour explains why policy makers must now turn to coordinated monetary and fiscal policy to drive economic cycles (Monetary Policy 3), and why geographic diversification is ever more important in today's tri-polar world.
August 7, 2020
In an interview with Bloomberg TV, Bridgewater Co-CIO Bob Prince describes the market impacts of zero interest bonds, the challenges of managing a portfolio in this environment, and implications for the dollar as reserve currency.
August 6, 2020
In the wake of the COVID-19 crisis, we have built out our framework for understanding economic policy going forward: what we call Monetary Policy 3. In short, with interest rates around the world at zero and traditional methods of monetary stimulus now ineffective, policy makers have been forced to turn to coordinated monetary and fiscal policy in order to engineer any hope for a sustained recovery. Senior Portfolio Strategist Jim Haskel sits down with Co-CIO Greg Jensen and senior investor Jason Rotenberg to discuss how we’re tracking MP3 implementation around the world, the divergences we’re seeing between countries, and the challenges policy makers are facing.
July 9, 2020
The rapid policy response to the COVID-19 pandemic has resulted in an unprecedented speed of asset reflation. What took almost two years to achieve during the 2008 financial crash and almost four years during the Great Depression has unfolded in only one month during the current crisis. Co-CIO Greg Jensen and members of our research team explore the unique lengths and the potential limits of policy makers’ efforts to stimulate the economy.
We believe the most important topic facing all investors today is how to manage money in a zero interest rate environment. Recently, Bridgewater’s research team published a three-part paper that outlined the challenges and potential solutions, exploring some of the commonly asked questions that investors continue to wrestle with, such as: how to get diversification in a world of zero bond yields, the increased importance of geographic diversification, and how to think about managing the risk of deflation. Read the paper by Co-CIOs Bob Prince and Greg Jensen and Investment Associate Melissa Saphier, or listen to the podcast, where Bob and Greg discuss these themes with Bridgewater’s Senior Portfolio Strategist Jim Haskel.
June 19, 2020
The coronavirus has accelerated a new paradigm of coordinated monetary and fiscal policy where central banks are printing money to finance large budget deficits and spark spending. Senior Portfolio Strategist Jim Haskel and Co-CIO Ray Dalio explore why the by-product — zero or near-zero interest rates across the developed world — is a critical issue for investors to understand and how similar moments in history can provide valuable lessons to navigate volatility.
June 23, 2020
By guaranteeing very low interest rates years into the future, the central bank can leverage Yield Curve Control (YCC) policies to finance large government deficits without putting upward pressure on the cost of borrowing. Karen Karniol-Tambour and members of our research team explain how YCC has moved from an abstract concept to a practice that the world’s largest central banks have adopted or are heavily considering.
Geographic Diversification Can Be a Lifesaver, Yet Most Portfolios Are Highly Geographically Concentrated
February 20, 2019
The best way we know to earn consistent returns and preserve wealth is to build portfolios that are as resilient as possible to the range of ways the world could unfold. To uncover vulnerabilities that are outside of investors’ recent lived experiences, we find it valuable to stress test portfolios across the various environments that have cropped up across countries throughout history.