Last Friday, November 22, the Wall Street Journal reported that the world’s largest hedge fund Bridgewater Associates is betting a massive $1 billion that the global stock markets will fall by March 2020. This report has certainly stirred the emotions of global investors.
Already the ongoing uncertainty with Brexit and the U.S.-China trade war has ensued tension within global investors. The WSJ report spread like a wildfire and investors started discussing the future of markets from these levels. The stock markets are currently trading at their all-time highs with Dow Jones Industrial Average hitting the 28,000-mark just a few days back.
Citing unnamed sources, the WSJ report states that Bridgewater has spent nearly $1.5 billion in options contracts. These options contracts would possibly reward the hedge fund in case the Euro Stox 50 and S&P 500 decline.
Furthermore, WSJ explained that the bet uses put options assembled over the months by Morgan Stanley and Goldman Sachs. This gives investors the option of selling at a predetermined price by a given date.
People familiar with the matter said that this is just 1% of the company’s $150 billion worth assets under management (AUM). However, WSJ’s report has not gone well with Bridgewater’s hedge fund manager Ray Dalio.
Ray Dalio Refutes the WSJ Report
Soon after the WSJ report buzzed the global markets, Ray Dalio took it to Twitter refuting the claims by the publication.
I believe that we are now living in a world in which sensationalistic headlines are what many writers want above all else, even if the facts don’t square w/ the headlines. You can believe me or you can believe The WSJ writer. I hope you have come to know that you can believe me.
— Ray Dalio (@RayDalio) November 22, 2019
However, in a word with CNBC, the WSJ spokesperson Steve Severinghaus defended the publication’s reporting. In an email to WSJ, Severinghaus wrote:
“The Journal’s article is based on interviews with multiple sources and we stand by the conclusions we reported. The article does not report, as Mr. Dalio says, that Bridgewater has a ‘net’ bearish position on the stock market. The article made clear that the trade could be a hedge for the firm’s significant long exposure to equity markets, among other possibilities.”
“Though we won’t comment on our specific positions we do want to make two things clear. First, the way we manage money is to have many interrelated positions, often to hedge other positions, and these change often, so that it would be a mistake to look at any one position at any one time to try to deduce the motivation behind that position. Second, we have no positions that are intended to either hedge or bet on any potential political developments in the U.S,” the statement reads.
Many analysts in the past have raised skepticism over the current state of the economy and are expecting a major recession in the coming times. While at this time, the markets are hitting the roof! It will be interesting to see how things move ahead.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.