Managers at Bridgewater Associates are positioning for a slump in US and European corporate bonds.
The $151 billion fund founded by Ray Dalio has already publicized bets against sovereign debt and equities and is now short corporates as well. Their thinking is that inflation will be more-sticky, leading to more rate hikes than anticipated.
Co-CIO Greg Jensen believes the Fed will eventually blink and tolerate a period of higher inflation but if not, stocks could fall a further 25%.
The bets so far have paid up with Bridgewater gaining $26.2% so far this year in its flagship fund.
One area they like is commodities.