Emotions, gut instincts could drive markets under Trump, hedge fund billionaire Dalio says

Ray Dalio expects big changes under Trump

President-elect Donald Trump's ideas surrounding fiscal policy could reignite "animal spirits" and lead to a boom in the U.S. economy, hedge fund billionaire Ray Dalio said.

In a LinkedIn post published Monday evening, Dalio described a major ideological shift in Washington, one where Trump's administration admires tough "can-do" businessmen.

"Trump is a deal maker who negotiates hard, and doesn't mind getting banged around or banging others around," Dalio wrote. "Similarly, the people he chose are bold and hell-bent on playing hardball to make big changes happen in economics and in foreign policy (as well as other areas such as education, environmental policies, etc.)."

Dailo suggested reading novelist Ayn Rand's work, sometimes associated with the libertarian movement, to understand the environment that could be witnessed under a President Trump.

"This particular shift by the Trump administration could have a much bigger impact on the U.S. economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits and attract productive capital," Dalio wrote. "Regarding igniting animal spirits, if this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge."

The term "animal spirits" was used by economist John Maynard Keynes to describe how human emotion drives consumer confidence.

He also went on to describe Trump's foreign policy, saying the U.S. should expect Trump's administration to be aggressive, citing the president-elect's recent comments about China.

"Trump is questioning the one-China policy which is a shocking move," he wrote. "Policies pertaining to Iran, Mexico, and most other countries will probably also be aggressive."

Dalio is the founder of hedge fund giant Bridgewater Associates, which manages $160 billion for about 350 clients.

Read Dalio's full post here.

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