The stock market is plunging and could fall a lot further with the U.S. at the center of a huge global bubble, says chief investment officer of world’s largest hedge fund

A hotter month than expected inflation report rocked the stock market on Tuesday, with a top executive at the world’s largest hedge fund arguing it’s just the beginning of the pain for investors.

In an interview on the SALT Hedge Fund Conference In New York on Monday, Greg Jensen, co-chief investment officer of Bridgewater Associates, said the stock market has not fully priced in a recession and that the US is at the center of a global bubble that has yet to burst.

The co-CIO, a thrice honoree in FortuneThe 40 Under 40 list of rising business stars showed that investors are overestimating the Fed’s ability to control inflation and that asset prices will ultimately continue to fall as a result.

“I think the biggest misconception right now is the belief that we’re going back to, essentially, pre-COVID prices,” Jensen said, by Reuters.

Bridgewater Associates turned down Fortune’s request for comments.

Monday’s bearish prediction was not the first time Jensen has spoken about his fears for the US economy and stock market. In August, the co-CIO told Bloomberg that markets are in the midst of a “deglobalization” trend and forecasts stocks to fall another 20% to 25% as the Federal Reserve continues to raise interest rates.

Jensen’s comments echoed earlier statements from fellow chief investment officer Bob Prince, who told Bloomberg in May at the World Economic Forum in Davos that the US is on the verge of stagflation, a toxic economic mix of low growth and high inflation, and that investors were not adequately accounting for the impact of the Fed’s monetary tightening .

On Monday, however, Jensen noted that Bridgewater can generate profits for its clients amid the market downturn by shorting, or betting against, the shares of select companies.

The leading hedge fund sold short some 28 European companies for a total position valued at up to $10.5 billion in Juneaccording to data compiled by Bloomberg. But it reduced its disclosed short positions in European companies to just $845 million in August.

The trade was likely profitable as the EURO STOXX 50 index, which tracks 50 blue-chip companies in 11 European countries, is down more than 17% this year amid Europe’s energy crisis.

Bridgewater’s flagship fund, Pure Alpha II, also did well this year, up 21.5% through July, according to anonymous sources at Bloomberg.

A timely prediction

Jensen’s comments about investors discounting the impact of rising consumer prices and interest rates came just before a worse-than-expected inflation reading on Tuesday that caused the dow The Jones Industrial Average will drop above 1200 points.

Consumer prices rose 0.1% in August and 8.3% from a year earlier, the Bureau of Labor Statistics revealed. Economists were surprised by the increase as most expected consumer prices to cool in August amid a 10.6% monthly drop in gasoline prices.

However, rising house prices, health care costs and new car prices helped keep inflation elevated in August. And core consumer prices, which exclude volatile energy and food prices, rose 6.3% last month from a year earlier. That is a considerable increase from the 5.9% rate seen in June and July.

Experts say it’s a sign inflation is “taking hold” and the Fed will have to do more to bring it down, just as Bridgewater has said all year.

“We continue to believe that markets are underestimating how entrenched US inflation has become and the magnitude of the response that will likely be required from the Federal Reserve to dislodge it,” Aichi Amemiya, US economist at Nomura, wrote in a research note on Tuesday, arguing that the Federal Reserve will be forced to raise rates by 100 basis points at its next meeting to ensure price stability.

This story originally appeared on fortune.com

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