Bridgewater Associates founder Ray Dalio issued stark warnings about the U.S. economy’s mounting debt burden, comparing the fiscal strain to arterial blockage that could trigger a financial “heart attack.”
Debt Crisis Threatens Economic Stability
Speaking at an Abu Dhabi Finance Week launch event, Dalio warned that escalating debt service costs are “squeezing out other spending” and building up like plaque in a clogged circulatory system, reported Reuters. “A doctor would warn of a heart attack,” the billionaire investor cautioned.
The U.S. national debt has surpassed $37 trillion, with Moody’s projecting the debt-to-GDP ratio to climb from nearly 100% in 2025 to approximately 130% by 2035. Moody’s downgraded the U.S. long-term credit rating from Aaa to Aa1 in May, citing concerns about fiscal sustainability.
Gold as Portfolio Insurance
Dalio recommended investors allocate “somewhere between 10% and 15%” of their portfolios to gold as protection against market instability. Gold futures recently hit record highs near $3,600.
“Gold was uncorrelated with other assets, its value tending to rise during a crisis when other assets fall,” Dalio explained. He emphasized that with the world “abundant in debt” and geopolitical tensions rising, investors should question “whose money do you own?” when building neutral portfolios.
Fed Policy and Market Valuations
The S&P 500 tracked by SPDR S&P 500 (NYSE:SPY) and the Nasdaq Composite have gained over 12.25% and 14.33% year-to-date, respectively, closing at record highs as markets anticipate Federal Reserve rate cuts.
However, Dalio’s warnings align with concerns about elevated valuations amid underlying fiscal pressures.
Dalio previously sold his remaining Bridgewater stake in July, stepping away from the hedge fund he founded in 1975 after building it into one of the world’s largest investment firms.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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