Ray Dalio warns of escalating risks in the US elections: Why investors must immediately diversify their asset allocation?

Bridgewater Associates founder Ray Dalio recently issued a clear warning about the US economic outlook in his 2025 year-end review. He pointed out that the United States is facing multiple risks, including political polarization, worsening debt structures, and a long-term weakening of the currency. These issues could erupt around the 2026 US midterm elections and have profound impacts on global financial markets.

As an investor who has long studied economic and debt cycles, Ray Dalio believes that the current US economy is not in a short-term fluctuation but is approaching a deeper structural turning point. He emphasized that political instability is significantly increasing the likelihood of policy reversals, especially in the context of potential changes in Congress’s power dynamics.

Ray Dalio noted that if the Republican Party loses control of both the House and Senate, the current fiscal, tax, and regulatory policies could be quickly overturned. Frequent and unpredictable policy changes will weaken the long-term planning ability of businesses and capital, and also shake investors’ confidence in the stability of the US economic system. In this environment, more and more funds are considering reallocating to markets outside the US.

On the monetary front, Ray Dalio is notably cautious about the outlook for the US dollar. He emphasized that the dollar’s weakening is not solely driven by interest rate cycles but stems from long-term structural issues, including high government debt, persistent fiscal deficits, and increasing money supply. These factors are gradually eroding the dollar’s purchasing power, risking a decline in real returns on dollar-denominated assets after inflation.

Based on this assessment, Ray Dalio believes that gold, the Chinese renminbi, and other non-dollar assets will have greater allocation value in the future. Among them, gold still possesses important safe-haven properties in dealing with political uncertainty and financial system pressures. He does not advocate completely abandoning dollar assets but repeatedly emphasizes the importance of diversification, warning that over-concentration in a single currency system could bring systemic risks.

Looking ahead, Ray Dalio urges investors to look beyond short-term election emotions and examine global economic structural changes over longer cycles. He believes that as the 2026 US elections approach, political outcomes could profoundly influence the monetary system, capital flows, and global asset pricing. Proactively diversifying assets strategically will be key to managing uncertainty.