When the world’s biggest hedge fund with over $160 billion in assets speaks, people tend to listen. The hedge fund is Bridgewater based in Connecticut and in an article by Jennifer Ablan of Reuters, Bridgewater says the last 2 decades have been very good for corporations. Almost every major driver of profit margins has improved – labor’s bargaining power fell; tariffs fell; globalization increased; technology allowed for greater scale and lower marginal costs; anti-trust enforcement fell; and interest rates fell. Whatever corporations were asking from government, the government has delivered and if they had not, equities would be 40% lower in value.
Bridgewater does not believe the next decade things will continue. Incentives for offshore production have been reduced as global labor costs have moved closer to equilibrium, with domestic costs and rising trade conflict increasing the risk of offshoring is much smaller. Around the world, people are concerned about rising wealth inequalities. Similar to President Trump’s agenda – protectionism is increasing. As well government’s are tending to adding more regulation not less.
Linking to dividend paying stocks, while these stocks have benefited from government regulations there are also in a position to remain profitable as changes happen over time. There will always be many challenges, sometimes the profitable companies can handle the changes better which is good for you.
There are more questions than answers, till the next time – to raising questions.