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Ray Dalio Talks about a Major Reversal in the US

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Ray Dalio sees a profound ideological shift in the US

Ray Dalio sees a “profound president-led ideological shift” in the US (SPY) (IVV) (VOO), according to his November 15 post. According to Dalio, Donald Trump is poised to shift the current ideology in the US to one which puts “the stimulation of traditional domestic manufacturing above all else.”

US reversal

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Trump’s protectionist policies

As Dalio sees it, Trump’s ideology is far more pro-business and much more protectionist in essence. Donald Trump has openly held free market trade agreements such as the NAFTA[1. North American Free Trade Agreement] responsible for the industrial sector’s (XLI) (DIA) job losses. By allowing free movement of goods, services, and labor across member nations, NAFTA has led to a large number of American companies setting up their manufacturing bases in Mexico, which helps lower the cost of labor for them. Thus, many manufacturing jobs have moved to Mexico (EWW)

Along with his attempt to get these jobs back to the US (IWM) (QQQ), Trump also plans to protect the US’s domestic economy from foreign competition. Some say this may not bode well over the longer term as free trade boosts efficiency and quality through competition.

The reversals

Dalio clearly sees the US economy under a Trump presidency being characterized by:

  • “decreasing globalization, free trade, and global connectedness”
  • “aggressively stimulative fiscal policies”
  • “increased US growth, higher inflation, and rising bond yields”

He also sees big shifts in corporate profitability, foreign policy, and environmental protection. “There is a good chance that we are at one of those major reversals that last a decade,” says Dalio.

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