On Dalio's "Paradigm Shifts" and the Second Act of Unconventional Monetary Policy
This post analyzes Ray Dalio’s recent article entitled “Paradigm Shifts.” Dalio is a global macro investor that I respect very much for his thoughtfulness and success. Unlike most SA articles or posts on this blog, what follows is more of a stream of consciousness than a structured thesis, point, counterpoint, and conclusion. “Every decade had its own distinctive characteristics, though within all decades there were long-lasting periods (e.g., 1 to 3 years) that had almost the exact opposite characteristics of what typified the decade.” What typified the last ten or so years? Extended stock market gains, global disinflation, stock buybacks, mergers and acquisitions, venture capital, the rise of passive investing, low real GDP growth, low volatility, Quantitative Easing/the expansion of the Fed balance sheet, artificially low interest rates, big tech, and reduced cost of labor. Nearly all of these are related in one form or another. QE and low interest rates led to stoc