Bridgewater's Dalio: 2015 May Be Like 1937 for the Market


A recent Wall Street Journal piece notes that hedge-fund manager Ray Dalio and others have discussed potentially significant parallels between 1937 and 2015.  Dalio, in a March letter earlier this year, identified the following comparable timeline:

  • Debt limits reached at “the bubble top” in 1929 and in 2007;
  • Interest rates fall to zero in 1931 and 2008;
  • Money printing begins a “beautiful deleveraging” in 1933 and 2009;
  • Stocks and “risky assets” rally in 1933-36 and 2009-14, during which the economy improves through cyclical recovery; and
  • The central bank tightens, producing a “self-reinforcing downturn” in 1937 and, maybe, 2015.

Others have suggested 2011 is a better comparison.  The distinction matters.  2011 kicked off significant gains; 1937 triggered a downturn. The 1937 camp seems to be growing according to some.