A billionaire economist has warned that the coming Federal Reserve interest rate hikes will lead to the stock market plummeting by 20 percent.
Ray Dalio, founder of the Bridgewater Associates investment company, joined predictions that the central bank would increase interest rates by another historical 75-percentage points, and that the year would end with interest rates at 4.5 percent.
It would be nearly double from the current range of 2.25 and 2.5 percent, which Dalio wrote would plunge stocks by a fifth as Wall Street’s three major indexes have already seen a more than 9 percent drop this past month.
Dalio added that the negative forecast would impact all levels of the economy, including American’s 401ks, which will see a significant drop along with the stock market.
‘This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it,’ he wrote.
Ray Dalio (above), billionaire founder of the Bridgewater Associates investment company, warned that the predicted federal interest rate hikes would send stocks falling by 20 percent
Dalio and other economists believe the central bank will hike interest rates by another consecutive 0.75 percent in order to reach a 4.5 percent rate by 2023
The hikes have caused shocks in the stock market, with the Dow Jones Industrial average falling by 9.34 percent this past month alone
The Federal Reserve has been ramping up interest rates this year after keeping them near zero during the pandemic in order to combat historically high inflation rates.
In June and July, the central bank raised interest rates up by 0.75 percent, the highest in more than two decades, and many economists predict the Fed will make a third, consecutive 0.75 percent hike in the coming weeks.
Many have predicted that the hikes will tip the economy into a full recession next year, which the country is technically already under after reporting negative GDP growth in the first two quarters of 2022.
And with a recession, comes a stock market crash that will take a huge hit on retirement accounts.
Since the latest report at the end of the second fiscal quarter in June, that average 401k balance stood at $103,800, down almost 15 percent from the previous quarter and down 30 percent from 2021.
And things have only gotten worse on Wall Street amid the interest rate hikes.
In the last month, the Dow Jones Industrial Average fell by more than 3,000 points, or 9.34 percent.
The S&P 500 also fell by 9.58 percent, of 410 points, in the past month, with the Nasdaq taking the biggest hit and falling by 12.18 percent, or 1,644 points.
The S&P 500 is heading for its biggest annual loss since the 2008 Great Recession.
The S&P 500 fell by 9.58 percent this past month and is heading for its biggest annual loss since the 2008 Great Recession
The Nasdaq suffered the biggest losses this month, falling by 12.18 percent
Wall Street is expected to suffer repeated losses as the nation is threatened by a looming recession. Pictured: traders looking over prices at the New York Stock Exchange on Friday
Despite open fears of a recession, Christopher Waller, governor of the Federal reserve, backed the central bank in making another 75 basis-point move, during a speech in Austria last week.
‘I support a significant increase at our next meeting on September 20 and 21 to get the policy rate to a setting that is clearly restricting demand,’ Waller said.
He said that the Fed will continue to take ‘significant steps’ to control policy and added that rate hikes may continue into early 2023.
Fed Chair Jerome Powell had already kept the option open for the increase, which is supported by many bankers in a desperate attempt to control inflation.