Bridgewater CIO Warns of a ‘Painful & Much Longer Recession’ Than Expected

Vinod Dsouza
Bridgewater Associates CIO Karen Karniol-Tambour
Source: LinkedIn

Karen Karniol-Tambour, the Chief Information Officer (CIO) at Bridgewater, warned investors of a more “painful” recession than previously expected. She termed the upcoming recession could be more difficult to handle and would be “longer” than what we’re accustomed to. The CIO opined that the recession might cause an economic disaster that could take years to reverse and get back on track.

Bridgewater is the world’s largest hedge fund, with close to $130 billion in assets under management.

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Bridgewater CIO: How Different Could This Recession Be?

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Karen claims that seeds for a recession were laid during the Covid-19 lockdowns as businesses around the world took a hit. She predicted that a recession could jolt the world’s economy sometime during this decade.

“The next big risk is recessions that are deeper and longer than what we’ve been accustomed to,” she said to Bloomberg. She added that in previous downturns, “central banks could just hop right in and reverse it”. This time the markets are on a different turf as the central banks are involved in the recession, she claims.

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The constant interest rate hikes along with the printing of excess money are the root cause of the disaster, according to Karen. “So to me, the dam has been broken where fiscal policymakers are now part of the story. They’re much more likely to step in with big fiscal expansions,” she said.

She added, “So they (Feds) will be forced to tighten a lot more than they would’ve otherwise wanted, or ease a lot less. Those become recessions that are much more difficult, much more painful,” she said.

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Therefore, according to the Bridgewater CIO, the upcoming recession could be the mother of all recessions we’ve seen lately. Nonetheless, President Joe Biden said last week that he does not see a recession and the economy will boom hereon. His comments come at a time when inflation in the U.S. fell from 7.1% to 6.5% in 2023.