Bridgewater Dalio: Infighting intensifies after the midterm elections, which may push up short-term U.S. Treasury yields

Ray Dalio, the founder of Bridgewater Associates, published an article discussing the results of the U.S. midterm elections. He believes that the elections will not change the core issues facing the United States, such as debt, wealth and value divergence, geopolitical tensions, climate, and technology. Future conflicts between parties and within parties, as well as government dysfunction, may intensify.

Dalio pointed out that funding issues will soon come to the forefront: on December 11, Trump's temporary funding will expire, and the federal debt is expected to hit its ceiling by March 2027. By the fall of 2027, the Treasury is expected to exhaust its funding maneuvering options. He believes that the related conflicts may be quite intense, and uncertainty could push up short-term yields such as U.S. Treasury bills, exacerbating concerns about liquidity and credit risk, and weakening the status of U.S. Treasuries as a major global safe collateral.

He also stated that Elizabeth Warren's appointment as chair of the Senate Banking Committee could trigger conflicts and changes that impact the economy and markets. The election results will make Trump a targeted lame-duck president, weakening the United States' international standing and potentially leading to a strategic contraction of the U.S., increasing the influence of regional powers like China.