Firstly, Dalio is of the opinion that stocks will most probably fare better than bonds. Moreover, in his opinion, risk premiums need to fall as they have maxed out. Furthermore, he has enumerated various circumstances for an economy which will comfort austerity due to the fiscal cliff. According to him these circumstances include that the austerity is coming, quantitative easing is losing its efficacy, economy is running out of steam and yields cannot go down anymore.
Ray Dalio firmly believes that risk premiums will expand in the future. He says that all comes to interest rates, adding that investors put a lump-slump payment for the cash flow in the future. In period of deleveraging one get through interest rates which are lower than the growth rate.
The hedge fund manager says that the United States is facing austerity and that the effects of quantitative easing diminish as it does more rounds. Moreover, he adds that growth is flagging which is an unprecedented risk when it comes to economy. Also Ray Dalio believes that this slowdown is one with a very little room for maneuvering and that back up in rates will happen in 2013 as the yield curve has reached rock bottom.