While broader financial markets anticipate a possible Federal Reserve interest rate cut in September, billionaire investor Ray Dalio is warning that the move could have severe consequences for specific assets.
Speaking during a Reddit Q&A session on September 4, Dalio cautioned that if the Fed initiates cuts, the U.S. dollar and equities could suffer sharp declines.
The Bridgewater Associates founder suggested that short-term rates and the dollar would weaken, particularly against gold, while long-term rates could rise, steepening the yield curve.
In this environment, Dalio warned that stocks might underperform despite monetary easing, reflecting investor caution toward debt instruments and the growing risk of stagflation.
It’s worth noting that market sentiment strongly points to rate cuts, with a 25 basis point reduction in September widely expected.
Analysts, including those at Bank of America, anticipate at least two cuts this year and additional easing into 2026.
Notably, weak labor market data and cooling inflation have reinforced these expectations, while sliding Treasury yields signal anticipation. Still, economists caution that excessive cuts could reignite inflationary pressures.
Dalio’s concerns on U.S. economy
Overall, Dalio’s latest warning adds to his long-standing concerns about America’s fiscal vulnerabilities and broader economic health. In the past, he has employed vivid metaphors, likening debt to plaque buildup and the economy to a boat headed toward rocks, warning that unchecked borrowing could ultimately trigger an “economic heart attack.”
To this end, he has projected that such a debt-driven crisis could strike within the next three years, with national debt already surging to $37 trillion, about 124% of GDP, levels not seen since World War II.
Dalio has repeatedly pointed to widening deficits and the mounting cost of servicing debt, warning that without fiscal discipline, the U.S. risks spiraling into unsustainable borrowing that could undermine confidence in both the dollar and Treasuries.
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