Billionaire investor and founder of Bridgewater Associates, Ray Dalio, has issued a grave warning about the escalating political and social divisions in the U.S.
‘We Are Now On The Brink’ Of Civil War – Dalio
In a recent interview with the Financial Times, Dalio estimated that the likelihood of a civil war could be as high as 40%, a figure that underscores his deep concerns about the current state of the nation.
The civil war Dalio envisions is not necessarily one where people “grab guns and start shooting.” Instead, he sees it as an acceleration of the political polarization that has occurred in American politics over recent decades. In this civil war, “people move to different states that are more aligned with what they want, and they don't follow the decisions of federal authorities of the opposite political persuasion,” he told the FT.
Dalio-founded Bridgewater Associates is one of the largest and most influential hedge funds in the world. Over the past few years, 74-year-old Dalio has gradually scaled back his formal role at the firm. He resigned as CEO in 2017 and stepped down as co-CIO last October. He does remain involved in a more informal capacity as a CIO mentor, offering advice and meeting with investors.
However, Dalio has long been vocal about his apprehensions regarding the U.S. political and economic climate.
He pointed to several critical factors that he believes are contributing to the nation’s precarious position:
- extreme levels of government debt
- significant wealth inequality
- rising internal political rifts
- ongoing external conflicts.
“We are now on the brink” and we “don't yet know if we will cross over into much more turbulent times,” Dalio stated, emphasizing the urgent need for attention to these issues to prevent potential disaster.
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Concerns About A Societal Fracture
In late 2020, he noted that the U.S. was already experiencing a form of civil war as people moved between states based on their political affiliations.
By early 2021, he lamented that America was in a “terrible financial state and terribly divided.”
Dalio’s concerns extend beyond domestic issues. Following the Israel-Hamas conflict in October, he said that the risk of a global war involving major powers like the U.S. and China had surged to about 50%, according to Business Insider. This global perspective adds a layer of complexity to his warnings, illustrating how interconnected the threats facing the U.S. are with broader international dynamics.
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Broad Market Investors Must Be Vigilant Of Socio-Political Upheavals
For investors, Dalio’s stark warnings serve as a crucial reminder of the importance of considering the broader socio-political context when making financial decisions. The potential for significant upheaval in the U.S. could have far-reaching implications for markets and economies worldwide. As such, it is essential to remain vigilant and prepared for the various scenarios that might unfold in these uncertain times.
Investors in U.S.-equity broad market ETFs such as those tracking the S&P 500 index – the SPDR S&P 500 ETF (NYSE:SPY), the iShares Core S&P 500 ETF (NYSE:IVV) and the Vanguard S&P 500 ETF (NYSE:VOO) are most susceptible to any such event.
Investors in other popular broad market ETFs such as the Vanguard Total Stock Market ETF (NYSE:VTI), and the Invesco QQQ Trust Series I ETF (NASDAQ:QQQ) also have broad exposure to equity markets in the U.S. Any negative socio-political event could have a direct and deep impact on the performance of these ETFs.
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Photo: Web Summit on Flickr
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