Ray Dalio, the head of the world’s largest hedge fund, said investors should expect low returns and volatile financial markets, but not another financial crisis like the one in 2008.
“I’m not bearish on stocks,” Mr. Dalio, the founder of Bridgewater Associates, said on Bloomberg Television from Austin, where he is attending a conference hosted by the University of Texas Investment Management Co.
Global equities snapped a three-year rally as a slowdown in the Chinese economy fueled the biggest retreat in raw materials prices since 2008 just as the Federal Reserve ended its zero interest-rate policy. The Standard & Poor’s 500 Index ended 2015 in negative territory and the Dow Jones Industrial Average had its worst year since 2008.
Equities will likely return about 4% in the long term and the average investor shouldn’t bet against active investors, Mr. Dalio said. He suggests investors hold a balanced portfolio with 5% to 10% in gold.
Fed policy makers debating their outlook for interest rates in January expressed concern that the fall in commodity prices and the rout in financial markets increasingly pose risks to the U.S. economy. Fed Chair Janet Yellen has suggested that the central bank could delay its plans for tighter policy to assess how the economy reacts to current headwinds.
Mr. Dalio, whose firm manages $154 billion, said the Fed could raise interest rates by another 25 basis points. He said such a move would be a "serious mistake."