The investment chief at the world’s largest hedge fund says stocks must sink another 20% before the Fed steps in: report

• Bridgewater Associates’ Greg Jensen said the market must drop 20% more before the Fed steps in.
• The S&P 500 has slumped 9% this year, and another 20% drop could bring it to early pandemic levels.
• “We’re at a turning point now and things will be much different,” Jensen said.
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Stocks must slide another 20% before the Federal Reserve takes action, according to an investment chief at the world’s largest hedge fund. 

Greg Jensen, co-chief investment officer at Bridgewater Associates, told Bloomberg News that the Fed won’t come to the market’s rescue — in what’s known as a Fed put — until the market drops another 15% to 20%. Even if that happens, he said it would depend on how quickly the bottom falls out from the market. 

So far this year, the stock market has largely slumped. The S&P 500 has dipped 9% to 4,349.93 as of early Thursday. Another 20% decline would bring the index down to about 3,480 points — a level last seen around the early days of the COVID-19 pandemic in 2020. 

Jensen said a decline in asset prices likely isn’t a bad thing from the Fed’s view, considering inflation is at its highest in 40 years.

“At these levels, it would take a much bigger move to get the ‘Fed put’ into the money,” Jensen told Bloomberg. “They’re a long way from that.”

Bridgewater, the firm founded by billionaire investor Ray Dalio, has $150 billion in assets under management. Jensen told Bloomberg he thinks the Fed just wants the market to reset, not to crash. Excess liquidity has caused elevated asset prices, and with the Fed tightening its monetary policy, not enough buyers can make up for the difference, he added. 

Investors were initially spooked by the potential for lower liquidity after Wednesday’s Fed meeting when Chairman Jerome Powell said there’s plenty of room to raise rates and declined to rule out rate hikes at every meeting this year.

Analysts told Insider the Fed’s moves are a sign of change coming to the economy. Jensen also reflected the sentiment in his interview with Bloomberg: “We’re at a turning point now, and things will be much different.”