• The stock market could be on the verge of “a lost decade” for investors, according to a Bridgewater Associates analyst note written on June 16 seen by Bloomberg.
  • “A lost decade” for stocks would reverse a yearslong trend of strong growth for corporate earnings as globalization has already peaked, Bridgewater said.
  • The firm said COVID-19 will have a negative impact on companies: “left with lower levels of profits and cash shortfalls, companies are likely to come out on the other side of the coronavirus more indebted,” according to Bloomberg.
  • Ray Dalio’s Bridgewater Associates is the largest hedge fund in the world. The firm recently suffered a 15% slump in assets amid the COVID-19 induced market sell-off.
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The stock market could be on the verge of “a lost decade” for investors, driven by globalization having already peaked, according to a June 16 note from Bridgewater Associates seen by Bloomberg.

The largest hedge fund in the world said it thinks the yearslong trend of strong corporate earnings could be on the verge of a multi-year reversal, exacerbated by the COVID-19 pandemic.

The firm explained, “Globalization, perhaps the largest driver of developed world profitability over the past few decades, has already peaked. Now the U.S.-China conflict and global pandemic are further accelerating moves by multinationals to reshore and duplicate supply chains, with a focus on reliability as opposed to just cost optimization,” according to Bloomberg.

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The note pointed to developments from two companies to back up its thinking on globalization: Intel and Taiwan Semiconductor, Bloomberg said. Both firms have recently announced their intention to build their next production facilities in the US despite the higher costs.

"Even if overall profits recover, some companies will die or their shares will devalue along the way. Left with lower levels of profits and cash shortfalls, companies are likely to come out on the other side of the coronavirus more indebted," warned the analysts, according to Bloomberg.

Ray Dalio's Bridgewater Associates recently suffered a 15% slump in assets amid the COVID-19 induced market sell-off.