- Ray Dalio sees little to worry about regarding the coronavirus outbreak.
- The hedge funder expects markets to rebound despite concerns over slowing growth.
- The virus will shave about one percentage point from Chinas economic growth rate.
Even as the death toll from the fast-spreading coronavirus illness exceeds 1,000 people in China and the number of infections rise to over 40,000, billionaire hedge fund manager Ray Dalio is exuding optimism.
According to Dalio, the impact of the pandemic on markets is overblown:
[Coronavirus] probably had a bit of an exaggerated effect on the pricing of assets
Going forward, Dalio expects more of a rebound.
Ray Dalio: There are bigger issues than coronavirus
Instead of harboring concerns over the coronavirus pandemic, Dalio has instead urged investors to worry about political polarization as well as income and wealth inequalities:
What concerns me most if you did have a downturn with the larger polarity that exists, the wealth gap and the political gap. I would be more concerned about that.
Dalios optimism comes at a time when analysts are struggling to quantify the impact of the pandemic. Consumption in China is expected to drop significantly. Market research firm International Data Corporation says Chinas smartphone shipments could plunge by over 30% in the first quarter.
China is the largest smartphone market in the world.
Service sector hardest hit by coronavirus
Other sectors in and out of China that have been hit by coronavirus include travel, hospitality and entertainment. Numerous airlines have cancelled flights to China and entertainment spots such as movie theaters have shut down. The pandemic is expected to reduce Chinas economic growth rate by up to one percentage point.
This would have a detrimental effect on an already slowing Chinese economy. In 2019 Chinas GDP expanded 6.1%, the slowest since 1990.
According to rating agency Moods Investors Service, Asia-Pacific countries will bear the biggest economic impact of coronavirus due to their strong tourism and trade links with China.
The U.S. is unlikely to be spared either. According to Senator Tom Cotton (R-Arkansas), coronavirus could be a huge threat to U.S. economic growth this year.
Markets have recovered
Still, Ray Dalios optimism might not be misplaced. After the Dow Jones Industrial Average index fell by around 4% in the latter half of January, it went on to fully recover and even set new all-time highs.
The Dow has recovered from its low set off by Coronavirus fears. | Source: TradingView
Other indices such as the S&P 500 and the Nasdaq Composite have recovered too.
After hitting a 13-month low owing to fears of reduced demand in China, oil rose by 2% on Tuesday.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered trading advice from CCN.com.
This article was edited by Sam Bourgi.
Last modified: February 11, 2020 9:30 PM UTC