DALIO: Trump could ignite animal spirits and it could be huge for markets
Hedge fund billionaire Ray Dalio, the founder of $160 billion hedge-fund behemoth Bridgewater Associates, expects we’ll see a significant shift in the economy when President-elect Donald Trump takes office.
“Trump is a deal maker who negotiates hard, and doesn’t mind getting banged around or banging others around. Similarly, the people he chose are bold and hell-bent on playing hardball to make big changes happen in economics and in foreign policy (as well as other areas such as education, environmental policies, etc.),” Dalio wrote in a LinkedIn post published on Monday evening.
He went on to recommend reading libertarian author Ayn Rand to understand the economic environment that could unfold under Trump.
“Regarding economics, if you haven’t read Ayn Rand lately, I suggest that you do as her books pretty well capture the mindset. This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers. It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power.”
He noted that the shift will “probably be even more significant than the 1979-82 shift from the socialists to the capitalists in the UK, US, and Germany when Margaret Thatcher, Ronald Reagan, and Helmut Kohl came to power.” He also recommended reading Thatcher’s “The Downing Street Years.”
“This particular shift by the Trump administration could have a much bigger impact on the US economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits and attract productive capital,” Dalio wrote.
All of this would be incredibly bullish for risk-on financial assets like stocks.
He continued: “Regarding igniting animal spirits, if this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge. Regarding attracting capital, Trump’s policies can also have a big impact because businessmen and investors move very quickly away from inhospitable environments to hospitable environments. Remember how quickly money left and came back to places like Spain and Argentina? A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money. These policies will also have shocking negative impacts on certain sectors.”
Read Dalio’s full post on LinkedIn here.
Julia La Roche is a finance reporter at Yahoo Finance.
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