"Bridgewater CIOs: Market Enters Second Stage of Tightening"
Bridgewater Associates' co-chief investment officers believe that the market has entered the second stage of tightening, where changes in economic conditions are not the primary drivers of changes in yields and asset prices. They argue that the upward adjustment in bond yields is justified due to factors such as moderately high inflation, strong wage growth, and robust labor market conditions. They expect this new stage to result in grinding pressure on growth and for the equity market to become less competitive compared to bonds. However, they note that a substantial and sustained rise in productivity, particularly through breakthroughs in AI and large language models, could potentially restore risk premiums in equities relative to bonds.
