as part of our
We're seeing signs of economic recovery, and we're certainly
seeing a bull market in stocks right now. But when you look at
these developments from a particular perspective, it suggests a
major opportunity for investors.
That's what Ray Dalio says. Dalio is the Founder of Bridgewater
Associates, the world's largest hedge fund (and one of the world's
most consistently successful).
But, more importantly, Dalio's success comes from his
understanding of the large cycles that appear in the way capital
flows around the globe.
Now, Dalio says, one such cycle is going to alter the investment
landscape and create a serious bull market.
At a panel at the
World Economic Forum
, Dalio said, "There's a lot of money in a place that's getting a
very bad return. And in this particular year, there's going to be,
in my opinion, a shift." He continued, "The shift of that massive
amount of cash is what will be a game changer."
This is a facet of what I've been talking about for a while, the
"risk on, risk off" trade.
Essentially, since the 2008 financial crisis, a huge portion of
global investors- both institutional and individual- have been
afraid of taking serious risks. That's why U.S. Treasuries have
been bought up to absurd levels, driving yields lower.
It's also why all the Fed's quantitative easing hasn't led to a
lick of inflation. All the assets and cheap cash are sitting on
banks' balancing sheets as a protective measure.
However, both Dalio and I think that those days are coming to a
After all, the biggest fears overhanging the market and keeping
all this wealth tied up in low-risk assets are abating.
The market is finally figuring out that the European debt crisis
isn't that big of a deal. The "
" and the debt ceiling debate both played out in such a way that
shows Congress won't derail the economy to prove a point.
Every economic indicator has been showing improvement.
But this big wealth shift really is the game changer in the
equation. We've seen bull markets before. We've seen economic
But we haven't seen a situation in which an overwhelming
majority of global wealth has hibernated in only the safest assets
- and has rushed out of them all at once, willing to chase higher
returns around the globe.
The effect? Rising stock prices, particularly with tech stocks
and emerging markets.
There's also going to be a curious effect on commodities and
gold. This exit from safe assets will boost economic activity - but
it will also lead to a threat of inflation, which the Fed will have
to manage. That, in turn, will lead to rising commodities (except
It's going to be an exciting year.