Hedge fund billionaire Ray Dalio, the founder of $160 billion hedge-fund behemoth Bridgewater Associates, appears to be bullish on president-elect Donald J. Trump at least in terms of what a Trump presidency means for the economy.
Dalio, 67, shared his preliminary perspective in a post on LinkedIn.
“To be clear, we are more non-ideological and practical/mechanical because to us economies and markets work like machines and our job is simply to understand how the levers will be moved and what outcome the moving of them is likely to produce,” Dalio noted.
In other words, he’s saying that we should look beyond the social and emotional controversies that will likely prove inconsequential for the economy.
Dalio believes there will be “a profound president-led ideological shift that is of a magnitude, and in more ways than one, analogous to Ronald Reagan’s shift to the right.” Specifically, it comes down to Trump’s policies that focus on traditional domestic manufacturing that are more pro-business and more protectionist.
“As a result, whereas the previous period was characterized by 1) increasing globalization, free trade, and global connectedness, 2) relatively innocuous fiscal policies, and 3) sluggish domestic growth, low inflation, and falling bond yields, the new period is more likely to be characterized by 1) decreasing globalization, free trade, and global connectedness, 2) aggressively stimulative fiscal policies, and 3) increased US growth, higher inflation, and rising bond yields,” he wrote.
Dalio believes there’s about to be a reversal that lasts a decade.
“However, the main point we’re trying to convey is that there is a good chance that we are at one of those major reversals that last a decade (like the 1970-71 shift from the 1960s period of non-inflationary growth to the 1970s decade of stagflation, or the 1980s shift to disinflationary strong growth). To be clear, we are not saying that the future will be like any of these mentioned prior periods; we are just saying that there’s a good chance that the economy/market will shift from what we have gotten used to and what we will experience over the next many years will be very different from that.”
Dalio’s preliminary assessment of all of this is that things are looking “broadly positive” for the economy.
“[The] straws in the wind suggest that many of the people under consideration have a sufficient understanding of how the economic machine works to run reasonable calculations on the implications of their shifts so that they probably won’t recklessly and stupidly drive the economy into a ditch. To repeat, that is our very preliminary read of the situation, which is too premature to take to the bank. Of course, we should expect big bumps resulting from big shifts regardless of who is engineering this big ideological shift. ”
He concluded: “So, what are we trying to say? The headline is that the ideological/environmental shifts are clear, their magnitudes will be large, and there’s a good chance that the “craziness” factor will be smaller and play a lesser role in driving outcomes than many had feared. In fact, it is possible that we might have very capable policy makers of the previously mentioned ideological persuasion in control.”
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Julia La Roche is a finance reporter at Yahoo Finance.
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