Ray Dalio Sours on Trump After Immigrant Ban, Joining Soros

  • Bridgewater founder was initially bullish on new U.S. leader
  • Sees significant risk that populist policies may hurt economy

Billionaire Ray Dalio’s About-Face on Trump

Billionaire Ray Dalio’s honeymoon with President Donald Trump is looking to be short lived.

Dalio, who in November was bullish on the incoming president’s ability to stimulate the economy, is now saying he’s more concerned that the damaging effects of Trump’s populist policies may overwhelm the benefits of his pro-business agenda.

Ray Dalio

Photographer: Simon Dawson/Bloomberg

“We are now in a period of time when how this balance tilts will be more important to the economy, markets, and our well-beings than normally dominant drivers such as central bank policies,” Dalio and co-Chief Investment Officer Bob Prince said in Bridgewater Associates’ “Daily Observations” note to clients on Tuesday.

Dalio, who runs the world’s largest hedge fund, is souring on the new president after he banned visitors from seven mostly Muslim countries, igniting protests nationwide, and proposed a border tax on Mexican goods. Earlier this month, Dalio said it remained to be seen whether Trump is aggressive and thoughtful, or aggressive and reckless. Dalio and Prince said so far they haven’t seen much thoughtfulness in Trump’s policy moves.

Money managers at hedge fund Carlson Capital take an even more negative view of Trump’s nationalist agenda. His policies may have dire consequences for the U.S. and global economy and his attempts to tax imports and subsidize exports could touch off a depression, according to their quarterly letter to clients.

“If the border adjustment mechanism is implemented as proposed we think it will cause a global depression and a major equity market decline,” Richard Maraviglia and Matt Barkoff said in the letter. “It is still unclear whether it will happen but at the very least we expect that U.S. trade policy will put downward pressure on global growth.”

Read more: A QuickTake explainer on Trump’s ’Border Tax’

Billionaire George Soros, who had backed Democrat Hillary Clinton in last year’s election, said in January that the stock market rally since Trump’s win, spurred by his promises to slash regulations and boost spending, will come to a halt. He called Trump a “con man” and a would-be dictator.

Some managers are more sanguine. Kyle Bass, founder of Hayman Capital Management, said Trump’s policies won’t be a “globalist nightmare” and that border tax adjustments will help finance a lower corporate tax rate that Trump has proposed. That, together with the possible repatriation of capital offshore, will be “extremely stimulative.” Bass said Trump’s policies would lead to real capital investment, competitiveness and an improvement in productivity.

Bridgewater’s Dalio and Prince said the current investment environment is marked by “exceptional uncertainty” and recommended avoiding concentrated bets, and holding easy-to-sell assets.

“While there is a lot of potential to improve fiscal policies and make beneficial structural reforms (to enhance the business friendly environment, reduce regulatory inefficiencies, etc.), there is also significant risk that his populist policies could hurt the world economy (and worse),” they said in the note obtained by Bloomberg.

Trump’s “America First” policy, his executive order on immigration and bent toward U.S. trade protectionism are reminiscent of the policies of populist governments in the 1930s, the Bridgewater note said.

“Nationalism, protectionism and militarism increase global tensions and the risks of conflict. For these reasons, while we remain open-minded, we are increasingly concerned about the emerging policies of the Trump administration,” they said.

Bridgewater Associates, based in Westport, Connecticut, oversees $160 billion in assets. It returned 2.4 percent in its Pure Alpha II fund last year, overcoming losses in the first half.

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