Ray Dalio fires back over hedge fund's reported $1.5B bet

The billionaire lashed out on LinkedIn to set the record straight.

Ray Dalio of Bridgewater Associates, the world’s largest hedge fund, is setting the record straight after a Wall Street Journal report said his firm placed a more than $1 billion wager to protect against the possibility that global markets will take a tumble by March.

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Dalio, in a LinkedIn post released Friday, said of the article: "It's wrong. I want to make clear that we don’t have any such net bet that the stock market will fall," adding that the firm attempted to convey to the reporter that publishing the piece with that angle "would be misleading but it was done anyways."

The trade, amounting to about $1.5 billion worth of puts, or contracts that give investors the right to sell shares at a specific price by a specific date, will make the hedge fund money if either or both the S&P 500 and the Euro Stoxx 50 fall, the report said, also noting it was unclear if the trade is an outright bet against markets or a hedge.

Prior to Dalio's LinkedIn post, Bridgewater, which has about $160 billion in assets under management, told FOX Business:

“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.”

- Bridgewater Associates Statement 

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The S&P 500 is in the midst of its longest bull market in history. The benchmark index has gained 365 percent since bottoming out on March 9, 2009, and is up almost 24 percent this year, according to the Dow Jones Market Data Group.

The Euro Stoxx 50 has climbed 61.7 percent since putting in its 2009 bottom and is up 20.2 percent year-to-date, Dow Jones Market Data shows.

If history is any indication, election years have typically been kind to the U.S. stock market, as noted by the Wells Fargo Institute.

  • Going back to 1928, the S&P 500 has only had four losing presidential election years on a total return basis
  • Two of those four years occurred during U.S. economic depression (1932) or recession (2008)
  • A third occurred in 1940, while the U.S. was still recovering from the Great Depression and as fascist armies were overtaking Europe 
  • The fourth occurrence (2000) came amid the bursting of the dotcom bubble

Wall Street strategists are just starting to release their 2020 outlooks, and they are all over the map.

Credit Suisse chief U.S. equity strategist Jonathan Golub has a 2020 year-end S&P 500 target of 3,425, up more than 10 percent from current levels. He upgraded his view on “economically sensitive groups” including financials, industrials, materials and energy.

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Morgan Stanley Strategist Michael Wilson thinks the Fed expanding its balance sheet at a pace of $60 billion a month could send the S&P 500 over the upper end of his 3,250 bull case, but he thinks the rally will run out of steam by April as the “liquidity tailwind” fades and the market focuses on fundamentals. He has a 2020 year-end target of 3,000 or 3.5 percent below current levels.