Dalio: Bessent Buyback Signals Debt Crisis, Touts Gold and Bitcoin

To address the imbalance, Dalio said the U.S. needs a three-part strategy: spending cuts, tax increases, and lower interest rates. All three must happen together to prevent any single adjustment from being too traumatic. He cautioned against forcing changes, warning that it would be "very bad if the Federal Reserve unnaturally forced interest rates down."

Dalio said the timing of a debt crisis depends on variables such as military conflict and political change. On the current trajectory, a crisis could arrive in as little as one year or as long as five. "My guess, which I suppose will be a bad one, is that it will come in three years, give or take two, if the course we're on is not changed," he wrote.

For portfolios, Dalio recommended being underweight bonds. He said 10% to 15% of assets should be in gold, alongside "a bit" of bitcoin. The recommendation comes as long-term Treasury yields have risen sharply, pressuring stocks. The S&P 500 was on track to end the week down more than 1%, snapping a three-week advance.

Dalio's post landed during a volatile week for U.S. markets. The yield on the 10-year Treasury note climbed, fueling concerns about the government's borrowing costs. Bessent's buyback announcement was meant to improve market functioning, but Dalio interpreted it as a sign of deeper fiscal strain.

For a broader view of crypto market dynamics, see AlphaScala's crypto market analysis.