Bridgewater hedge fund warns Trump policies could induce a recession

The efforts by President Donald Trump and his administration to reshape the global economy will likely damage the economy and financial assets, according to hedge fund giant Bridgewater Associates.

Co-chief investment officers Bob Prince, Greg Jensen and Karen Karniol-Tambour said in a newsletter Wednesday that the world is undergoing a “rapid shift to modern mercantilism” that could have a negative outcome for the economy.

“We expect a policy-induced slowdown, with rising probability of a recession,” the CIOs wrote.

The Bridgewater commentary comes as the stock market has already been rocked by Trump’s tariff policies. The S&P 500 is down 8.3% year to date and 5.2% since the April 2 rollout of Trump’s so-called reciprocal tariffs. Many of those levies have since been paused, but tensions have escalated between the U.S. and China.

Outside of the stock market, U.S. bonds and the dollar have also declined in recent weeks. Some Wall Street experts have suggested that the widespread decline could be a sign that foreign investors are backing away from the U.S. in the Trump era.

Bridgewater hinted at this idea in the newsletter, saying that the policy changes create “exceptional risks to US assets, which are dependent on foreign inflows.”

The combination of an economic slowdown and a shift away from the U.S. could unwind a lot of the conventional wisdom of investing from over the past decade, when America financial assets and economic growth broadly outperformed other major countries.

“This shift in asset allocations has created risks if the future is different than the past. Many portfolios are increasingly vulnerable to 1) any weakness in growth, 2) central banks not being able to ease into problems, 3) equity underperformance, and 4) US underperformance relative to the rest of the world,” the newsletter said.

Bridgewater, which was founded by Ray Dalio in 1975, reported having $92.1 billion in client assets as of Dec. 31.