Ray Dalio Sounds Alarm On 'Risky Period' For US — Why Elections Could Trigger Instability

Bridgewater Associates founder Ray Dalio has called the stretch between the 2026 midterm elections and the 2028 presidential race 'particularly risky' for the United States, warning that ballooning government debt, fading foreign demand for Treasuries and a volatile political calendar could collide at the worst possible time.

Dalio made the remarks on the Prof G Markets podcast on 30 April, in an episode titled 'Ray Dalio: The World Order Has Unravelled.' Speaking with host Ed Elson, the billionaire investor said the US is 'on the brink of some of these problems' and placed a roughly two-year timeline on when the pressure could peak.

At the core of his argument is a spending gap he described in blunt terms. 'The US government spends $7 trillion . It takes in about $5 trillion . So it has, it's 40% overspending,' Dalio said. He added that the country is effectively running a two-tier economy, with the wealthiest 10 per cent of the population in 'a boom or maybe a bubble' while the bottom 60 per cent is 'really hurting.'

He called the affordability gap 'probably the number one political issue' heading into November's midterm vote and predicted that Republicans will likely lose control of the House of Representatives. That outcome, he warned, would bring 'great conflicts, including, you know, impeachments, investigations and so on.'

Dalio Flags Shrinking Foreign Appetite For US Bonds

Dalio singled out China's retreat from US government bonds as a growing structural risk. Beijing has built up large dollar reserves through years of trade surpluses but is now rethinking that exposure as geopolitical friction and the threat of sanctions make US assets less attractive, he said.

The Federal Reserve, meanwhile, has limited room to step in. As of early March, the broad money supply stood at $22.69 trillion, and the Fed's preferred inflation measure, the core personal consumption expenditures index, had reached its highest reading in a year, per the 24/7 Wall St.

With the 10-year Treasury yield hovering near 4 per cent as of late April, the central bank faces pressure from both directions: inflation too sticky to justify cuts, and a government borrowing bill too large to absorb without them.

Weak Growth And Falling Confidence Cloud Midterm Picture

Consumer confidence has been sliding for months. The University of Michigan's sentiment index fell to 53.3 in March, down from 56.6 the month before and well below the long-run average of 84. First-quarter GDP grew at 2 per cent, an improvement on the 1 per cent recorded in the final three months of 2025, but still too sluggish to reassure households already squeezed by rising prices.

Market volatility has also flared. The VIX hit 31.05 on 27 March before pulling back to 18.81. The S&P 500, however, is up 28 per cent over the past 12 months, a gap between prices and sentiment that Dalio's warning implicitly challenges.

The podcast appearance marked the sharpest version of a warning Dalio has been escalating for months. In a post on X in February, he declared that the post-1945 global order had officially broken down and said the world had entered what he calls 'Stage 6' of his Big Cycle framework - a period of 'great disorder' in which 'might is right,' Fortune wrote.

In a separate post in January, he had already predicted the affordability crisis would cost Republicans the House, writing that 'President Trump has a two-year unimpeded mandate that can be weakened greatly in the 2026 mid-term elections and reversed in the 2028 elections.'

On the podcast, Dalio described the coming two to three years as 'going through a time warp,' driven by AI-led disruption, the Iran conflict and shifting alliances. He urged investors to hold well-diversified portfolios but stopped short of recommending any particular allocation.

The Congressional Budget Office's February 2026 outlook projected a federal deficit of $1.9 trillion for the current fiscal year under existing law, with debt held by the public on track to reach 120 per cent of GDP by 2036.

Originally published on IBTimes UK