FAST FIVE: Bridgewater Warns Of Much Lower Equity Prices As Margins Shrink
In addition to preaching against the dangers of capitalism and warning that unless America can fix its growing inequality problems, it faces a “revolution”, Bridgewater's Ray Dalio appears to have been reading the research reports by Michael Wilson.
Echoing these concerns in a Wednesday report, Bridgewater cautions that the major drivers of high US corporate profit margins are unsustainable and “now under threat”, and will eventually result in much lower equity prices.
“Labor's bargaining power fell, corporate taxes fell, tariffs fell, globalization increased, technology allowed for greater scale and lower marginal costs, anti-trust enforcement fell, and interest rates fell.
“We are in the midst of a populist backlash against rising inequality and increasingly seeing a move toward more protectionism,” it said in the report.
“Recent surveys show increasing animosity toward globalization and the power of companies more broadly and a bit more welcoming attitudes toward government regulation of firms.” Bridgewater also spotlighted the growing discussion about taxing mega-profitable firms that have benefited from current government policies.