(Bloomberg) – Billionaire investor Ray Dalio doesn’t expect the Federal Reserve to cut interest rates “significantly,” given recent swings in the U.S. Treasury market. He then said that bonds are a risky investment.
“Treasury bonds are not a great investment,” the Bridgewater Associates founder said Tuesday at the Greenwich Economic Forum. “There is interest rate risk in the bond market.”
Investors are getting ahead of the curve by betting on a rapid rate cut, Dalio said. Last month, the Federal Reserve cut interest rates for the first time in four years, cutting the federal funds rate by half a percentage point. But September’s strong jobs report gives policymakers room to proceed at a slower pace going forward.
The U.S. bond market has been volatile this year, with yields on two-year bonds ranging from 3.5% to over 5%.
Dalio said U.S. Treasuries are overweight in the portfolios of institutional investors and central banks. He added that geopolitical uncertainty is also an issue for the US debt market.
He said “foreign countries are concerned about holding bonds” because of the potential for sanctions.
In a wide-ranging interview, Dalio spoke about the US election and its potential impact on markets. The investor is bullish on former President Donald Trump’s economic policies, arguing that his proposed tax cuts for corporations are “more classically capitalist.”
“He makes a very good point about the potential for higher tariffs,” Dalio said, adding that he estimates Trump’s tariff proposals could raise about $800 billion a year.
He also said such tariffs would lead to inflation.
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