Billionaire investor Ray Dalio’s latest warning about a potential U.S. debt crisis is putting a fresh spotlight on an ETF trade that has already been gaining traction: moving away from long-duration Treasuries and toward assets such as gold and Bitcoin.
The Bridgewater Associates founder said investors should reduce their bond exposure and consider allocating 10% to 15% of their portfolios to gold, along with a smaller Bitcoin position. Dalio warned, according to Bloomberg, that a U.S. debt crisis could arrive in roughly three years, “give or take two,” if policymakers fail to rein in the fiscal deficit.
His comments arrive as the long end of the Treasury market is already under pressure. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) recently fell to $81.35, its lowest closing level since June 2004, while the fund was down about 6.6% year to date.
• iShares 20+ Year Treasury Bond ETF stock is showing downward pressure. Where are TLT shares going?
TLT vs. Gold
The weakness in long-duration bonds reflects rising yields, with the 30-year Treasury yield recently reaching 5.34%, its highest level since 2007, according to Reuters. The Treasury responded by doubling the size of some long-term bond buyback operations to at least $4 billion per transaction.
But the intervention has so far done little to resolve the broader fiscal concerns. The 30-year yield remained around 5.2% after the announcement, while the dollar subsequently weakened.
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That backdrop strengthens the case for investors looking beyond government debt. SPDR Gold Shares (NYSE:GLD) offers a straightforward ETF vehicle for Dalio’s proposed gold allocation. Gold itself surged more than 3% on Wednesday to above $4,480 an ounce as Treasury yields fell and the dollar weakened.
Bitcoin provides the higher-risk version of the same thesis. Dalio has argued that “non-government-produced monies” such as gold and Bitcoin could perform relatively well if debt pressures eventually lead to currency debasement or inflation. Bitcoin topped $79,000 on Friday. Investors seeking ETF exposure can use the iShares Bitcoin Trust ETF (NASDAQ:IBIT).
The ETF Trade Is Not Simply “Sell Bonds”
Dalio’s warning does not necessarily mean investors should abandon Treasuries altogether. A more nuanced positioning shift could involve reducing exposure to long-duration debt through TLT while retaining short-term Treasury exposure through ETFs such as iShares 0-3 Month Treasury Bond ETF (NYSE:SGOV) or State Street SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:BIL).
That creates a potential four-way ETF barbell: gold and Bitcoin for monetary and fiscal risk, short-term Treasurys for liquidity, and less exposure to long-duration bonds.
For ETF investors, the key question is whether the recent Treasury turmoil is merely a temporary yield spike — or the beginning of the debt-cycle deterioration Dalio has warned about for years.
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