Bridgewater's Ray Dalio weighs in on geopolitical risk
Ray Dalio had believed that trade tensions would subside but not now thinks a "scarier agenda" is in play with all kinds of wars possible.
Dalio said his scenario was shattered by the latest threat of tariffs on $100 billion of Chinese goods. He notes that the move unleashed some aggressive rhetoric from China.
"Now we have a very public game of chicken going on. Maybe Trump's statement was just an impulsive slip-up that he will backtrack on, or maybe he was serious," Dalio writes.
He says that one knows what Trump will do next but that it's suddenly possible that his trade team means what it says. He highlights aggressive rhetoric on Chinese trade from Navarro and Lighthizer along with militaristic talk from Bolton.
Dalio also ponders the possibility of a capital war, which financial tools are deployed. He believes it would "be even uglier than a trade war".
In terms of trading it, he has this advice:
"Our philosophy for managing money through such geopolitical shifts is to know where our edge is, and to neutralize those exposures on which we do not have an edge, while ensuring our portfolios are liquid (to be flexible) and diversified (to not have concentrated risks)."
