Bridgewater Associates founder Ray Dalio said the tax cut could lead to some big gains for the U.S. stock market.

“We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws,” Dalio told CNBC Tuesday from the World Economic Forum in Davos, Switzerland.

The investor said we’re in the late part of the cycle and predicts we will see “a market blow-off” rally, fueled by cash from banks, corporations and investors.

“There is a lot of cash on the sidelines. … We’re going to be inundated with cash,” he said. “If you’re holding cash, you’re going to feel pretty stupid.”

S&P 500 is up 25 percent in the past 12 months. The current bull market bull market started in 2009.

Dalio explained the Federal Reserve’s potential rate hikes are the key risk for the market. He said if the central bank increased interest rates by 100 to 125 basis points, asset prices will drop.

“You can’t have a significant rise in interest rates without knocking over the whole asset markets,” he said. The “Fed is going to determine what the level of real interest rates are.”

Bridgewater is the world’s largest hedge fund, managing about $160 billion, according to its website. Dalio started the firm in 1975 out of his two-bedroom apartment in New York City. He is now worth an estimated $17 billion, according to Forbes.

Source: Investment Cnbc
Ray Dalio says market surge may be ahead: 'If you're holding cash, you're going to feel pretty stupid'