Ray Dalio told a conference in Abu Dhabi on Tuesday that market participants likely won’t be talking about coronavirus in “another year or two”.
He’s right. Either it will pass and nobody will care, or we’ll all be dead. Either way, we won’t be talking about the virus.
I jest. Dalio is, like the rest of humanity, just trying to get a read on something which is, by its very nature, difficult to get a handle on.
Worries about the spread of the virus “probably had a bit of an exaggerated effect on the pricing of assets because of the temporary nature of that, so I would expect more of a rebound”, Dalio told those in attendance.
“It most likely will be something that in another year or two will be well beyond what everyone will be talking about”, he added.
In their coverage, Bloomberg suggests “global equities have been in turmoil amid fears about the spread of the deadly coronavirus”.
I suppose that depends on your definition of “turmoil”. Emerging market stocks haven’t done well (and we all know what happened to mainland Chinese shares and stocks in Hong Kong and Taiwan coming off the holiday), but on the whole, after last week’s surge, the impact has been pretty benign:
Obviously, the story hasn’t been the same for commodities. And EM FX has been hit hard. Meanwhile, bond yields have begun to price back in a global downturn. But the point is simply that if you’re looking for evidence of the virus in markets, equities isn’t the best place to look.
Dalio ultimately pivoted to his familiar list of longer-term issues including societal divisions, fractious politics and wealth inequality.
“What concerns me most if you did have a downturn — we are now 11 years in expansion — whether that’s one, two, three years forward, with the larger polarity that exists, the wealth gap and the political gap”, he said. “I would be more concerned about that”.
This is easy to lampoon on days when the pandemic headlines seem dire, but Dalio is obviously correct. Assuming the Wuhan virus eventually crawls back into the wet market it came out of, we’ll be right back to discussing the potential flash points at the heart of the epochal political shifts which have defined western democracies since the 2015 populist uprising.
Also, it’s important not to judge Dalio’s pandemic assessment on a couple of soundbites from a conference. You can read a longer piece from Bridgewater here and you can be sure the firm has written about it since that missive.
The linked post begins with Dalio saying this (verbatim): “First of all let me be clear that I’m a ‘dumb sh-t’ when it comes to pandemics because what I don’t know about them is more important than what I do know”.