- The dollar will tumble from 20-year highs as capital flows weaken and the Fed stops hiking, Bridgewater's co-CIO said.
- "So we think you're in for a secular bear market in the dollar once you get past the current speed of the Fed tightening," Greg Jensen told Bloomberg TV.
- The comments come after the Fed raised rates at the highest clip since 1994.
The US dollar will be vulnerable to a long-term bear market once the Federal Reserve starts winding down its aggressive cycle of interest rate increases, Bridgewater's co-CIO told Bloomberg TV.
The dollar recently hit a 20-year high as investors shift capital to the US to take advantage of interest rate differentials in the short term.
But its valuation now looks "extremely high," and given the size of the US current account balance, even slight changes in the flow of capital can send the dollar lower, said Greg Jensen on Thursday.
"Right now, there's still short-term pressures — bullish on the dollar," he said. "But the longer-term pressures are quite bearish. So we think you're in for a secular bear market in the dollar once you get past the current speed of the Fed tightening."
Jensen's comments come after the Federal Reserve raised its benchmark rate by 75 basis-points on Wednesday, the highest jump since 1994. The Fed is trying to tamp down inflation, which is running at a 40-year high of 8.6% year-over-year.
High inflation has led Bridgewater's other co-CIO, founder Ray Dalio, to warn that "cash is trash." When asked Thursday if cash is still trash, Jensen replied "on a secular basis, we think so." But compared to other financial assets like stocks and bonds, cash looks better.
"The question of how good cash will be relative to other financial assets really comes down to what central banks try to target," Jansen said. "If they actually target their inflation targets, then cash is going to be particularly attractive [and] they've got to really cut the money supply in order to achieve that."
But if the central banks acknowledge that hitting their inflation goals would be too painful and back off from their targets, then "cash will be more trashy."