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Hedge Fund Giants See Big Trouble Ahead

Isaac Nuriani    |
Nov 11, 2022
  • There now is general agreement among analysts we’ll see an official recession in 2023
  • Two of the world’s best-known hedge funds have especially gloomy assessments about what’s in store for the economy
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Do you think the economy is as “strong as hell”?

President Biden does. At least, that’s what he told a reporter a few weeks ago.[1]

Now, I’m not naïve. I realize a president always wants to put the best possible face on the condition of the economy. But “strong as hell” seems a bit much. After all, at the time Mr. Biden said it, the nation had officially recorded two straight quarters of negative output, satisfying the working definition of a recession.[2] And while the advance estimate for third-quarter GDP is an improved 2.6%, there are analysts who seem confident the positive GDP measure is merely an aberration.[3]

“Going forward, growth could well turn negative in the fourth quarter and will likely be very weak over the next year,” wrote David Kelly, chief global strategist at JPMorgan Asset Management in a note following the publishing of the Q3 GDP number by the Bureau of Economic Analysis.[4]

He won’t get an argument from the economists at Fannie Mae, who currently project GDP for calendar year 2023 to come in at negative 0.5%.[5]

Indeed, forecasts the country will enter an official recession in 2023 continue to grow. A Bloomberg Economics forecasting model now pegs the likelihood at 100%.[6] Still, even as the consensus that recession is looming continues to build, many of the same observers anticipating recession happen to think the downturn will be mild.[7]

Not everyone agrees, however. In fact, two of the most profoundly negative outlooks for the economy come from two of the biggest hedge funds in the world.

Greg Jensen is the leader of one of those hedge funds. Jensen is the co-chief investment officer of Bridgewater Associates, the world’s largest hedge fund. In recent public statements, Jensen makes it clear that he’s expecting not only a recession in 2023 but a recession far greater in severity than what other observers seem to be anticipating.

As bad as that sounds, there’s another well-known hedge fund that has an even bleaker view of what’s to come for the economy. According to the Financial Times, Elliott Management recently sent out a letter to clients suggesting they should brace for the fallout from what the fund managers say could be an epic bout of hyperinflation that ultimately leads to “societal collapse.”

Obviously, each of these is an especially dark assessment of the economy’s prospects. And when compared to other projections of a far milder downturn, they might even come across as disingenuous and made for the express purpose of being provocative and grabbing headlines.

Still, when two of the world’s most highly rated hedge funds – one of which is also the world’s largest – share a particularly gloomy outlook of what’s in store for the economy, it almost seems imprudent NOT to pay attention to what each has to say.[8] You don’t reach the rarified air these two funds are breathing by being insincere at any time about outlook and motivation. So we’re going to look a little closer at what each is saying about the near-term health of the economy with an eye to determining if any of it is something individual retirement savers might want to take to heart.

Bridgewater Associates: “Very Significant Global Recession” Coming in 2023

Bridgwater’s Jensen doesn’t mince words when it comes to assessing the near-term outlook for the economy.

“2023 will likely be the year of a very significant global recession,” Jensen opined recently in a recent interview with MarketWatch.[9]

At the root of his assessment is a view that inflation simply cannot be brought back to earth unless the Federal Reserve takes measures that will result in significant damage to the economy.

Jensen isn’t revising or changing what have been chronically pessimistic views about what’s in store for the economy – he’s doubling down on them. Jensen has for some time been banging the drum that the Fed will have to throttle the economy in order to regain control of high inflation that’s now fully dug into the economic landscape.

What’s more, according to Jensen, responsibility for inflation rests largely on the Fed’s own shoulders, as well as those of the government.

Two months ago – at the SALT hedge fund industry conference in New York City – Jensen succinctly outlined what he sees as the principal drivers of the upward price pressures we’re dealing with presently.

“Fiscal policy and monetary policy have come together to create an explosive mix of demand outstripping supply post-COVID that led into this inflationary environment,” Jensen said.[10]

Jensen went on to emphasize that said environment presents “a challenge for policymakers, where they can no longer get what they want, which is, essentially, low inflation and reasonable growth.”[11]

As for the especially choppy economic waters already encountered this year, Jensen suggests we’ve not seen anything yet:

This is the early phase. You actually don’t face the dilemma yet. You have a 3.7% unemployment rate. It’s easy for the Fed to talk tough about inflation. What I think will happen going forward is you’re going to have inflation staying stubbornly higher than markets are expecting as growth starts to turn down. That’s when it gets really tricky.[12]

And at what point does he think we’ll see anything resembling an actual light at the end of the tunnel? Not until 2024, he tells MarketWatch.[13]

Elliott Management: Central Bankers Have Been “Dishonest” in Their Inflation Assessments  

Jensen’s view of where the economy’s headed surely is disconcerting to those who are pinning their hopes on the more modest downturn expected by other observers. But it’s positively sunshine and rainbows compared to what those at Elliott Management foresee.

In a recent client letter seen and reported on by the Financial Times, Elliott cited “extraordinary” financial conditions brought about by an extended period of cheap money” as the catalyst of a potential “set of outcomes that would be at or beyond the boundaries of the entire post-WWII period.”[14]


In an indictment of those responsible for the wildly expansionary monetary policies in place for years, Elliott told clients that central bankers have been “dishonest” about the real reasons for high inflation. Elliott takes issue with central banks pointing the figure of blame for inflation at supply-chain problems rather than their own recklessness when it comes to the application of monetary policy.[15]

Elliott even went as far as to suggest the world could be facing a hyperinflationary outcome, one with the potential to trigger “global societal collapse and civil or international strife.”[16]

In its letter, Elliott also wanted to emphasize to clients that they “should not assume they have ‘seen everything’” simply because they already experienced such significantly impactful economic events such as the “Great Inflation” of the 1970s and early 1980s, the burst of the dot-com bubble in the early 2000s or even the 2008 financial crisis.[17]

In keeping with the same theme, Elliot added that the notion “‘we will not panic because we have seen this before’ does not comport with the current facts.”[18]

Essentially what Elliott is saying there is that retirement savers should resist the temptation to decide, against the backdrop of all that has transpired over the last half-century or so, to adopt a posture of “this, too, shall pass.” Although that’s a common mantra of financial media personalities when trouble arises, it may be wrongheaded to assume that what’s going on now doesn’t have the potential to exert a lasting impact on one’s personal financial profile.

Indeed, what both Greg Jensen and Elliot Management are saying – in ways that are similar – is that the rubber finally is meeting the road; that years and years of profligate fiscal policy and ultra-easy monetary policy are in the process of exerting a terrible impact on both the domestic and global economies.

By implication, they also are saying that savvy retirement savers should be prepared for these outcomes and adapt accordingly.

Now, for clients of Bridgewater Associates and Elliott Management, presumably those firms will make the adjustments they see as appropriate in light of the magnitude of the trouble they each believe is on the way. For individual retirement savers, however, the responsibility for being prepared will fall to them.

This, then, brings us to the next subject of this piece: How should retirement savers prepare for the possible period of especially intense turmoil that both Jensen and Elliott Management say is coming for all of us?

Bridgewater Has a History of Viewing Gold as an Effective Risk-Mitigation Asset

Some might suggest that by proposing the question, I’m in full agreement with Jensen and/or Elliott Management that a downturn of rather epic proportions sits in front of us.

The truth is that I don’t know. The truth is that they don’t know – not for sure. That’s why even the most experienced and credentialed analysts and observers use words like “could,” “possibly” and “potentially” when discussing prospects for the future.

That said, Bridgewater and Elliott are both very successful hedge funds run by people who are as credible as you’ll find anywhere. Additionally, a lot of economists are connecting the same basic dots from the mega-problems these two foresee back to the actions of the Federal Reserve – even if those economists don’t envision quite the same severity of outcome as do Jensen and Elliott Management. Allianz’s Mohamed El-Erian and esteemed Johns Hopkins Professor Steve Hanke are examples of two such economists – and there are plenty of others.[19]

All of this said, the prudent retirement saver need not assume the very worst outcome in order to justify preparing for a possible negative outcome. The good news – such as it is – is that the same viable strategies designed to help insulate a saver from the impact of a modest downturn have the potential to offer greater value if that downturn proves even uglier.

One component of such a strategy might be the acquisition of assets with the recognized potential to thrive in the face of substantial economic uncertainty. Physical gold and silver are two examples of assets that have demonstrated that potential, historically. As a matter of fact, Greg Jensen made a high-profile gold recommendation two years ago amid his concerns that the world was facing a “potentially more volatile set of circumstances.”[20] And his Bridgewater colleague, chief investment strategist Rebecca Patterson, recently identified gold as an asset worthy of serious consideration for use in helping mitigate the effects of the dreary economic environment the firm sees ahead.

Ultimately, each saver will have to decide for himself or herself the most suitable way to prepare for the possibility of a serious economic downturn. Before deciding how to negotiate a downturn, however, savers will have to decide if the hazard exists in the first place. If you agree with the assessments of the “average” economist right now, then you also agree the hazard exists. And if you share the concerns of the folks at Bridgewater Associates and Elliott Management, then you believe the hazard could be of significant dimensions. And if you believe that, it’s high time to begin preparing in earnest.


[1] Fox Business, “Biden says the economy is ‘strong as hell’ as inflation rages in US,” YouTube video, 0:54 (October 17, 2022, accessed 11/10/22).
[2] Bureau of Economic Analysis, “Gross Domestic Product (Third Estimate), GDP by Industry, and Corporate Profits (Revised), 2nd Quarter 2022 and Annual Update” (September 29, 2022, accessed 11/10/22).
[3] Bureau of Economic Analysis, “Gross Domestic Product, Third Quarter 2022 (Advance Estimate)” (October 27, 2022, accessed 11/10/22).
[4] Nicole Goodkind, CNN Business, “Don’t be fooled by a strong GDP report” (October 26, 2022, accessed 11/10/22).
[5], “Economy Expected to Contract Further in 2023, as the Fed Appears Resolved to Tame Inflation” (October 12, 2022, accessed 11/10/22).
[6] Josh Wingrove,, “Forecast for US Recession Within Year Hits 100% in Blow to Biden” (October 17, 2022, accessed 11/10/22).
[7] Saeed Azhar and Lananh Nguyen,, “Goldman CEO says reasonable chance of U.S. recession in 2023” (October 18, 2022, accessed 11/10/22).
[8] David Granahan,, “Top 5 Hedge Funds for 2022” (July 22, 2022, accessed 11/10/22).
[9] Nathan Vardi, MarketWatch, “Greg Jensen nailed inflation, the Ray Dalio leadership change, and won at poker. Inside his big year.” (November 5, 2022, accessed 11/10/22).
[10] SALT, “The State of the World & Investing with Bridgewater’s Greg Jensen,” YouTube video, 21:56 (September 15, 2022, accessed 11/10/22).
[11] Ibid.
[12] Ibid.
[13] Vardi, “Greg Jensen nailed inflation.”
[14] Laurence Fletcher, Financial Times, “Hedge fund Elliott warns of more pain to come after 2022 market rout” (November 2, 2022, accessed 11/10/22).
[15] Ibid.
[16] Ibid.
[17] Ibid.
[18] Ibid.
[19] Isabella Zavarise, Business Insider, “Mohamed El-Erian said the Fed made 2 big mistakes that will go down in history and spur a damaging recession that was ‘totally avoidable’” (October 9, 2022, accessed 11/10/22); Steve Hanke, Twitter post, November 3, 2022, 2:20 p.m. (accessed 11/10/22).
[20] Yun Li,, “The world’s largest hedge fund sees gold rising 30% to $2,000: ‘There is so much boiling conflict’” (January 15, 2020, accessed 11/10/22).





















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