Dalio: Party’s Almost Over — Keep an Eye on Central Banks

Bridgewater founder Ray Dalio wrote on LinkedIn that he thinks that after nine years of pumping money into the system and keeping interest rates low, central banks are starting to step away from the punch bowl.


The era of central banks creating favorable economic conditions is coming to an end — at least according to Ray Dalio.

The Bridgewater Associates founder took to LinkedIn on Thursday afternoon to share his views on current economic conditions.

Dalio’s take is that the banks are signaling a pullback in their involvement with the markets. The upshot? Investors should continue to enjoy the favorable conditions the banks created, but should be skeptical about the market conditions lasting forever.

“Our responsibility now is to keep dancing but closer to the exit and with a sharp eye on the tea leaves,” Dalio wrote in his LinkedIn post.

His note comes as the Federal Reserve signaled in its Monetary Policy Report, issued on Friday, that it will continue to raise interest rates.

According to Dalio, the nine-year-long cycle in which central banks “drove interest rates to nil and pumped money into the system creating favorable carries and abundant cash” is on its way out, which these banks have already signaled.

Dalio wrote that it is appropriate for central banks to become less aggressive given that the policies did their job — in his words, they “brought about beautiful deleveragings” and helped companies repair their balance sheets.

He also heaped praise on central banks for their actions while acknowledging that their work has become a political lightning rod.

“In my opinion, at this point of transition, we should savor this accomplishment and thank the policy makers who fought to bring about these policies,” he wrote. “They had to fight hard to do it and have been more maligned than appreciated.”

Bridgewater doesn’t project a big debt bubble bursting, Dalio noted. But the firm does expect that high debt brought on by healthcare, pensions, and social security will eventually cause what the firm calls “the big squeeze,” or eventual tightening of the financial markets.

This isn’t the first time Dalio has weighed in on economic or political issues online. In May he shared his views on fired FBI Director James Comey, who previously worked for Bridgewater.