Hedge fund king Ray Dalio shares his views on global populism

A hedge fund titan says investors should take global populism very seriously

Ray Dalio calls it one of the most powerful forces shaping economic conditions. It's so potent that he and a team at Bridgewater Associates, the $150 billion hedge fund he founded, published a 61-page paper on it Wednesday.

The research is titled, "Populism: The Phenomenon."

Dalio defines populism as "a rebellion of the common man against the elites, and to some extent, against the system." Over the last year, it has become a tremendously influential force, he said.

He tallied the share of votes received by populist candidates in developed countries around the world to create an index. The chart, on the first page below, shows a spike in populism recently – the highest since the 1930's.

He points to Donald Trump's election as president of the United States, the UK Independence Party in the United Kingdom, the AFD (Alternative for Germany) party, National Front in France, Podemos in Spain and Five Star Movement in Italy as reasons for the spike more recently.

"It is one of those phenomena that comes along in a big way about once a lifetime — like pandemics, depressions, or wars," he said.

The paper is largely a look back, focusing on 14 prominent populists of the last two centuries — from Andrew Jackson in the 1830s through Hugo Chavez in the late 1990s and early 2000s. Dalio explains that patterns leading to populism are clear in the cases he outlines, especially those from the 1930s, when a wave of populism spread over the developed world, including Franklin D. Roosevelt, Adolf Hitler and Benito Mussolini.

Those patterns include "weak economic conditions," "an uneven recovery in which the elite was seen as prospering," as well as "political squabbling/ineffectual policymaking."

Dalio does not make a direct analogy to the current environment in the United States except to say in a footnote:

"While we consider Donald Trump to be a populist, we have more questions than answers about him and are using these other cases to assess him against by seeing if he follows a more archetypical path or if he deviates from it significantly."