The next economic downturn is what 'scares me the most,' Bridgewater's Ray Dalio says

Key Points
  • Dalio's comments come at time when investors are increasingly concerned about a serious global economic slowdown, with a long-running U.S.-Sino trade war souring business and consumer sentiment.
  • A rise of populism is also a pressing concern for market participants, with nationalist and far-right parties making significant electoral gains worldwide in recent months.
  • "These types of political issues are now very connected to economic issues, so I think that's the character of the environment that we are in," Dalio says at the World Economic Forum in Davos.
Ray Dalio, founder of investment firm Bridgewater Associates, speaking at the WEF in Davos, Switzerland on Jan. 22, 2019.
Adam Galica | CNBC

The next downturn in global growth is a daunting prospect for financial markets, according to the billionaire founder of the world's largest hedge fund.

Comments by Bridgewater Associates' Ray Dalio on Tuesday come at a time when investors are increasingly concerned about a serious global economic slowdown, with a long-running U.S.-Sino trade war souring business and consumer sentiment.

"What scares me the most longer term is that we have limitations to monetary policy — which is our most valuable tool — at the same as we have greater political and social antagonism," Dalio said during a panel discussion at the World Economic Forum Davos, Switzerland.

"So, the next downturn in the economy worries me the most," he added.

A rise of populism is also a pressing concern for market participants, with nationalist and far-right parties making significant electoral gains worldwide in recent months.

In addition to the ongoing trade dispute, Dalio said these types of political issues bear a striking resemblance to market conditions during the final years of the Great Depression in the late 1930s.

"These types of political issues are now very connected to economic issues. So I think that's the character of the environment that we are in," Dalio said.

In an interview with CNBC later Tuesday, Dalio warned of a "significant risk" of a U.S. recession in 2020.

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Watch CNBC's full interview with Bridgewater founder Ray Dalio