Bridgewater's Greg Jensen on Why Markets Have Further to Fall

Tracy Alloway (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:14)

And I'm Joe Weisenthal.

Tracy Alloway (0:16)

Joe, you know something that really annoyed me last year?

Joe Weisenthal (0:18)

No, there are a number of things, I'm sure.

Tracy Alloway (0:21)

Yeah, there's actually a lot.

Joe Weisenthal (0:23)

Yeah.

Tracy Alloway (0:24)

Okay, there's a lot.

Joe Weisenthal (0:25)

I hear you're annoyed. I hear I'm just a part of our daily chatter, but keep going, keep going.

Tracy Alloway (0:32)

What I'm annoyed about today? Yeah.

Well, there was a moment early last year where people were talking about stagflation, and it wasn't the risk of stagflation. People were talking about, oh, we're in a stagflationary environment, which really bothered me because, yes, you know, prices were going up, but economic growth was still relatively strong. And so there was no way you could have said that last year, there was stagflation happening.

Joe Weisenthal (0:58)

Yeah, I think that's right. You know, people say this kind of stuff all the time. People throw out any terms, the 70s, it's the 80s, it's 1994

It's 2002 People are always reaching for something. There's no, you know, that's like, you know, I guess optimistically, you say that's what makes a market, right? People have a bunch of different views.

Tracy Alloway (1:17)

This is very true. Well, I have to say, you know, some of the people who were accurately talking about the risks of stagflation, not stagflation actually happening in that particular moment, I feel like they've been sort of borne out by events.

And the US economy is still going relatively strong. It's not shrinking by any means. But with the Federal Reserve raising rates, the question clearly on everyone's mind is whether or not we're going to get a soft landing, whether or not it's possible to have prices start to come down, but also maintain economic growth.

Joe Weisenthal (1:52)

Well, what I would say is for sure, whatever you want to call the environment of this year and sort of the last quarter of last year, the second half of last year, it's been a really toxic bruise, so to speak, for financial assets, for asset prices. So the economy is still growing, it appears, and the jobs are still being added.

But this mix that we have right now of very high inflation relative to the last couple of decades or last several years and concerns about whether it could be brought down without clobbering growth, it's pretty rough for anyone who holds stocks and bonds.

Tracy Alloway (2:32)

Absolutely.

Yeah, it is a tough time for markets. And the other thing I would say is, we hear people talk about these big picture macro ideas like stagflation or recessionary risk or whatever, but then I feel like we don't actually hear that much about how you translate that into a cohesive trading strategy. So we've had some commodity specialists come on here and say, obviously, if inflation is going up, commodity prices are going up, buy commodities. But beyond that, it's not exactly clear to me how you actually invest in that type of environment, because as you mentioned, it just feels like it's bad for everything.

Joe Weisenthal (3:12)

Yeah, the only thing that really works, yeah, commodities sort of worked. Holding dollars has worked, ironically, given the level of inflation.

But this is an environment where typical portfolio strategies and most assets that people own, whether it's stocks or bonds, have really been for a rough ride.

Tracy Alloway (3:28)

Yeah.

All right. Well, on that note, we are going to be talking with someone who is basically all about forming a cohesive trading strategy around the macro picture. We're going to be speaking with Greg Jensen. He is, of course, the co-CIO of Bridgewater.

And we're going to get into it. Let's go. Greg, thanks so much for coming on Odd Lots.

Greg Jensen (3:49)

Great. Thanks for having me.

Tracy Alloway (3:50)

Maybe just to begin with, you could give us a short summary of what exactly it is that you do at Bridgewater and what makes Bridgewater, I guess, different to other types of funds, because I feel like Bridgewater, you know, you say that name and it has a little bit of mystique around it.

Greg Jensen (4:08)

Yeah, great. So, you know, I'm one of the three co-chief investment officers with Ray Dalio and Bob Prince, and we are focused on working with a team of over 100 investors to think through how the global financial system works to build that out into algorithms to predict what's next. It starts with really looking at the world and trying to process how all these things, the concepts you guys were talking about before, growth, inflation, how the money flows into financial markets as a result of those things and how to predict what's next. And so I am passionate about taking those types of big picture ideas, thinking through how you'll translate your thinking about them into rules that you could apply across time and across countries.