In this compilation episode of Excess Returns, hosts Jack Forehand and Matt Zeigler bring you the most valuable insights from their conversations with Bob Elliott, former head of Ray Dalio’s research team at Bridgewater Associates. Elliott’s decade of experience leading research at one of the world’s premier hedge funds provides a rare window into institutional-level thinking that individual investors can apply to their own portfolios.
Key Topics Covered:
Markets and Macroeconomic Reality
Elliott dismantles the notion that markets can permanently detach from economic fundamentals, walking through how earnings, margins, and wage growth are all interconnected. He explains why claims of “this time it’s different” rarely hold true over longer time horizons.
The “Big or Small” Framework
Learn the powerful yet simple framework Elliott used at Bridgewater to tackle complex problems, including how he assessed the 2008 housing crisis with the straightforward question: “This housing problem, big or small?”
Income-Driven vs. Debt-Driven Economic Cycles
Discover why the post-COVID economy behaved differently than many expected and why the Fed’s rate hikes didn’t crash the economy – Elliott explains the crucial difference between income-driven and debt-driven economic cycles.
True Diversification Beyond 60/40
Elliott challenges conventional portfolio construction, explaining why the traditional 60/40 portfolio worked well only during specific economic conditions of the past 40 years and offers practical advice for genuine diversification in an uncertain future.
Wage Growth and Inflation
Understand the tight relationship between wage growth and inflation, and why inflation can’t meaningfully decline while wage growth remains elevated without productivity improvements.
The Fed’s Decision-Making Process
Elliott provides insight into why the Federal Reserve appears “behind the curve,” explaining how its consensus-driven, backward-looking data approach creates policy delays by design.
Whether you’re a seasoned investor or just beginning your financial journey, Elliott’s analytical frameworks and practical insights will help you think more clearly about markets, economic cycles, and portfolio construction in an increasingly complex financial landscape.
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Originally Posted Practical Lessons from Bob Elliott
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