ABU DHABI, United Arab Emirates — Billionaire hedge fund giant Ray Dalio thinks the roller-coaster impact of the new coronavirus on markets is likely exaggerated.
The fast-spreading virus, which has so far killed 1,018 people and sickened more than 43,000 across 28 countries, "probably had a bit of an exaggerated effect on the pricing of assets," he told attendees of the 2020 annual Milken Conference in Abu Dhabi Tuesday.
"Because of the temporary nature of that, I would expect more of a rebound. It most likely will be something that in another year or two will be well beyond what everyone will be talking about."
The comments from Dalio — the founder of Bridgewater Associates, which manages $160 billion in global investments — struck a much calmer tone than many of the analysts and investors who have spoken to CNBC on the topic. Some have warned the disease could evolve into something worse than the flu and that the outbreak could tip China into a technical recession that would impact the rest of the world.
Even some Wall Street bulls say they fear the virus could lead to a stock market correction — when stock prices drop at least 10% from recent highs — and that it currently poses the single biggest threat to the market rally.
U.S. markets managed to erase coronavirus-related sell-offs last week, with the S&P 500 scoring a new record close. The S&P and Dow broke four-day win streaks on Friday, but they're still up 3% and 2%, respectively, on the year, with Monday's stock market rally led by tech gains.
A major hit to China's economy
Already the virus has shut down business across the Chinese provinces that account for more than 80% of GDP and 90% of exports for the world's second-largest economy as the government instructs workers to stay home in an effort to contain the outbreak. It's pushed oil futures downward and sent OPEC and OPEC+ producers, particularly those in the Middle East, scrambling to put a floor under falling crude prices.
Gross domestic product growth in China, where the vast majority of deaths and infections have taken place, is expected to nearly grind to a halt this quarter, with some forecasts seeing a fall to less than 2% growth year-on-year. China's GDP growth already hit its lowest level in three decades at 6.1% last year amid its protracted trade war with the U.S.
For Dalio, who has a net worth of $18 billion and whose fund has made its clients almost $60 billion since it was founded 45 years ago, what's far more worrying are longer-term issues like wealth inequality.
"What concerns me most if you did have a downturn," Dalio said, "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, I would be more concerned about that."
