(Bloomberg) -- Billionaire hedge fund manager Ray Dalio said that he sees a “significant amount of risk in the bond market” as the U.S. moves toward a bigger deficit and the Federal Reserve unwinds its balance sheet.
“Tightenings become progressively more concerning because as you move along they’re more and more difficult to get perfect,” Dalio, founder of Bridgewater Associates, said in an interview on Bloomberg Radio. “As we’re progressing, we’re entering a period of greater risk in the nature of the market.”
Dalio added that Bridgewater has been long equities, but didn’t provide more details on how the world’s biggest hedge fund is trading the market. He said he doesn’t think the Fed can continue the pace at which it has begun to unwind its $4.5 trillion balance sheet. Dalio also said he expects the U.S. budget deficit to increase to 1.5 percent of GDP, growing the supply of debt at the same time the central bank is offloading bonds.
“I think they’ll be cautious in this but when you’re caught in this part of the cycle it’s very delicate,” he said.
