Bridgewater Associates’ three Co-Chief Investment Officers have issued a stark warning to investors, flagging “exceptional risks” to US assets as the Trump administration embraces a sharp pivot toward modern mercantilism and “America First” trade policies, according to a report by Reuters.
In a client newsletter published late Wednesday, Bob Prince, Greg Jensen, and Karen Karniol-Tambour outlined their growing concern that US markets – particularly equities – face significant downside driven by policy-induced economic headwinds, declining foreign capital inflows, and heightened geopolitical tension.
“We expect a policy-induced slowdown, with a rising probability of recession,” the trio wrote, signalling a more cautious macro outlook for US-focused hedge fund strategies.
Bridgewater, the world’s largest hedge fund with a reputation for deep macro analysis, cited the increasing vulnerability of US assets that have historically attracted foreign capital amid strong growth and central bank support. With those tailwinds fading and foreign investors potentially retreating, they argue the US market now faces a more precarious future.
The comments follow sharp market volatility in recent weeks, with US equities sliding, Treasuries selling off, and the dollar hitting a multi-year low after President Trump escalated a global trade war, rattling risk sentiment. Hedge funds with macro and global allocation strategies have been closely tracking these developments, particularly those with exposure to US duration and FX volatility.
Adding to the uncertainty, markets are increasingly pricing in the risk of a political clash between the White House and the Federal Reserve, with fears that President Trump may attempt to remove Fed Chair Jerome Powell – an unprecedented move that would further destabilise investor confidence, that Trump has since downplayed.
The warning marks a significant tonal shift from Bridgewater’s earlier stance. As recently as November, Karniol-Tambour had described US equities as a “good thing to hold” following Trump’s electoral victory.
