Billionaire hedge fund manager Ray Dalio is warning of a potential “economic heart attack” within the next three years due to the escalating debt crisis. Indeed, the U.S. national debt has more than tripled since 2000 to an estimated $36.2 trillion, according to the U.S. Treasury Department. Dalio believes that this is unsustainable and compares the rising debt to “plaque building up in the circulatory system.”
As a result, Dalio says that the situation has reached a critical “inflection point” as interest payments pile up on top of existing debt. In order to avoid an economic catastrophe, he suggests that the government reduce the deficit to 3% of GDP through a mix of tax adjustments and spending cuts. If this isn’t done, Dalio warns that there could be severe consequences that include a potential spike in interest rates.
Interestingly, Dalio is not alone in warning about the economy, as there are growing concerns among investors who think that President Trump’s tariff plans will hurt the economy and the labor market. This could lead to a decline in interest rates and a potential recession. As a result, consumer confidence recently plummeted, and bearish sentiment has reached a two-year high, with over 60% of investors having a pessimistic outlook.
Is SPY a Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust based on 407 Buys, 93 Holds, and five Sells assigned in the past three months, as indicated by the graphic below. After a 17% rally in its share price over the past year, the average SPY price target of $689.95 per share implies 17.5% upside potential.
