A recession is on the horizon, and it may be more severe than many anticipate. This is the grim evaluation provided by Bob Elliott, former Head of Ray Dalio’s Investment Team at Bridgewater Associates, during his appearance on the podcast.
Bob elaborates that various economic factors are aligning to create difficult circumstances. The interplay of current trade policies, ongoing inflation challenges, and a Federal Reserve that is limited in its ability to respond is generating substantial economic obstacles.
Tariffs are crucial in this economic forecast. While the debate over their inflationary effects continues, their negative impact on growth is more evident. When the cost of imported goods rises, consumers have reduced disposable income for other expenditures, leading to decreased demand throughout the economy.
The concepts of manufacturing and reshoring are not straightforward solutions either. Bob emphasizes that constructing new factories typically requires around five years, with payback periods extending to 30 years. This lengthy timeline is a key reason why CEOs are reluctant to make such investments, particularly in an environment with unpredictable policy shifts.
This uncertainty has eroded CEO confidence to its lowest point since the 2008 financial crisis, adding to the complexity of the economic landscape.
For individual investors, Bob provides surprisingly simple guidance. Despite his extensive experience managing substantial funds, he adheres to a basic personal investment strategy of dollar-cost averaging and diversification. He restricts his review of investments to once a year — generally the Wednesday before Thanksgiving.
This disciplined approach helps avoid overtrading and eliminates emotional decision-making in investments — a strategy that is effective whether managing regular income or a financial windfall.
Throughout our discussion, Bob underscores that the US economy primarily relies on consumer spending. When policies shift funds away from discretionary spending towards necessities, the repercussions affect the entire system.
Interested in hearing more of Bob’s perspectives on recession likelihood, investment approaches, and economic policy? Tune in to the complete episode now.
Timestamps:
Note: Timestamps may differ on individual listening devices due to the variance in dynamic advertising run times. The provided timestamps are approximations and could be off by several minutes based on changing ad durations.
(0:00) Introduction of Bob Elliott, former head of Ray Dalio’s investment team at Bridgewater
(2:56) Bob addresses the high likelihood of recession due to detrimental policies
(7:00) Tariffs likely to have short-term negative growth effects despite long-term manufacturing aspirations
(14:20) Shift from global supply chains to parallel and redundant manufacturing systems
(19:50) Four economic levers: tariffs, tax policy, monetary policy, and government expenditure
(26:15) Stock market reactions based on short-term forecasts despite a favorable long-term outlook
(34:15) Bond markets performing well as growth decelerates; potential recession duration of 1-1.5 years
(45:40) Long-term productivity growth fosters wealth despite short-term fluctuations
(53:15) Dollar-cost averaging and diversification suggested for individual investors
(59:15) Bob talks about founding GiveWell to identify the most impactful charitable giving
(1:11:10) Bob explains Unlimited Funds, which makes hedge fund strategies available to everyday investors
Thanks to our sponsors!
NetSuite
NetSuite is the leading cloud financial system that integrates accounting, financial management, inventory, and HR into a single platform, providing one source of truth. Visit NetSuite.com/PAULA to download the CFO’s Guide to AI and Machine Learning.
Indeed
If you’re searching for exceptional talent to enhance your team, Indeed is the solution. Visit indeed.com/paula and start your hiring process today.
Policygenius
Go to policygenius.com for free quotes and comparisons across multiple insurers. With Policygenius, you can discover life insurance policies that start at just $292 annually for $1 million of coverage.
Pestie
Pestie eliminates over 100 insect types, including spiders, ants, roaches, and scorpions. Safeguard your home against pests with Pestie. Receive a 10% discount on your order by visiting pestie.com/PAULA.
Quince
Quince provides a variety of high-quality products at accessible prices. Visit Quince.com/paula for free shipping on your purchase and 365-day returns.
Shopify
Diversify your business by selling both physical and digital products through Shopify’s all-in-one platform. Every 28 seconds, an entrepreneur makes their first sale on Shopify! Visit shopify.com/paula for a one-dollar-per-month trial for three months.
A recession is on the horizon, and it could be more severe than what many anticipate. This is the candid evaluation from Bob Elliott, the former leader of Ray Dalio’s Investment Team at Bridgewater Associates, as he shares his insights on the podcast.