Fed Chair Janet Yellen's cautious bearing to winding down easy monetary policy has been the correct approach, the Bridgewater Associates founder on "Squawk Box." Dalio's firm manages $163 billion overall, including nonhedge fund money.
"If I were running monetary policy, I'd wait to see for the whites of the eyes of inflation," he said, because the Fed should not be ahead of market expectations on increasing rates. The first hike is expected in the summer, though some market watchers think it may be earlier.
The Labor Department provides another piece of the economic puzzle for the Fed to consider, when it issues the September employment Friday. Economists forecast that 215,000 nonfarm payrolls were created last month. The disappointing August growth number of 142,000 jobs was expected to be revised higher.
Coming off an extremely volatile late September for stocks, investors were cautious Wednesday on the first trading day in October, which has traditionally been a tough month for stocks.
Looking at the markets, Dalio said, "the prospective return of asset classes, it's very narrow." He predicted expected returns of equities of "only about 4 percent."
Dalio did express optimism about the prospects for the U.S. in the near-term. "I see no real reason for a problem in the United States now other than too tight ... monetary policy. And I don't think you'll get to too tight of monetary policy."
Besides the Fed, Wall Street will be watching the European Central Bank's Thursday meeting, when the ECB is expected to detail its asset-backed purchase program—just as the U.S. central bank gets ready to end its bond-buying this month.
What happens this month or even in the next year are not big worries for Dalio. "My real concern is when the next downturn comes, which probably won't be for another couple of years ... 18 months," he said.