Bridgewater Associates founder Ray Dalio said Wednesday that the U.S. is suffering from the worst political polarization in more than a century — and that the U.S. is even more polarized today than it was during the Civil Rights era of the 1960s.
He also revealed that Bridgewater’s Pure Alpha fund is up 25% year-to-date, which is slightly lower than the 32% gain through June that Bloomberg News reported earlier this year, but still substantially higher than the year-to-date return of the S&P 500 SPX.
During an interview with MarketWatch editor in chief Mark DeCambre that kicked off the inaugural MarketWatch “Best New Ideas in Money” Festival, Dalio said the U.S. is facing “the largest amount of internal conflict since about 1900. Even more than the German ’30s,” he said.
Asked to elaborate on the metrics he uses, Dalio pointed to the growing wealth gap, as well as polarization separating Democratic and Republican voters.
“The Republicans are more conservative than they have ever been, and the Democrats are more liberal,” Dalio said.
“The voting across party lines is the least it has been since 1900,” Dalio added.
“You have the largest wealth gap that’s existed…you have a big internal debate over practically everything,” he said.
It’s possible that both parties might not accept the results of the next U.S. presidential election in 2024, similar to how former President Donald Trump insisted that President Joe Biden had “stolen” the election in 2020.
“It’s an ideological conflict,” Dalio said.
And he’s concerned that a recession in the U.S. could aggravate this divide.
“If you have a bad set of economic circumstances, people get angry. And they should, since some of them are suffering,” Dalio said.
There’s also the concern that a growing tensions between the U.S. and China could add to the economic hardship in the U.S., and potentially beyond.
“Twenty-two percent of all manufactured goods and imports come from China,” Dalio said.
“If you were in a situation where China was like Russia, in other words it’s not cool to invest or produce there, that economic impact would be an enormous,” Dalio said.
Shifting back toward talk of financial markets, Dalio offered some advice for small-time investors.
“We are in a period where most of the assets are going down,” Dalio said.
“The most important thing that you can do is have a well balanced portfolio,” he said. Instead of trying to time the market, investors should focus on diversification he said.
He also recommended that retail investors evaluate the soundness of their investments in real terms. For example, it would probably make more sense to buy inflation-indexed bonds instead of nominal bonds right now.
“The biggest problem of most retail investors have is that they think when soething goes up a lot, it’s a good investment — and not that it’s more expensive,” he said.
As the conversation with DeCambre wound down, the MarketWatch editor in chief asked Dalio how well his firm’s investments have been performing.
Get insights on investing and managing your finances. Speakers include investors Josh Brown and Vivek Ramaswamy; plus, topics such as ESG investing, EVs, space and fintech. The Best New Ideas in Money Festival continues Thursday. Register to attend in person or virtually.