By Chris Dieterich

CNBC cornered Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund at the Davos confab on Tuesday, was markets were in the process of melting down.

What’s he think of the current conditions? Well, he said that the slide in global markets will be a “negative for the economy” that will mean that the Federal Reserve “should remain flexible, it shouldn’t be so wedded to a path.”

Moreover, Dalio said he believes that the Fed is more likely to ease monetary policy sooner than it tightens. That’s coming just a month after the first increase to short-term interest rates in nearly a decade. Here’s more:

“The way that I think it will work out is that, as there are selloffs in asset prices, that brings the expected return of markets up. In other words, right now, near the [peak], the estimated return on equities was probably about 3.5%. Very low; also a problem if you’re [funding assets], pension funds and so on. As you’re having the correction, it raises the expected return of asset classes and cash stays low. Then that begins to attract in more investment. The problem in the early stages of that negative wealth effect feedback loop, which can cause psychology. “

As for policy: “A move to quantitative easing would bolster psychology.”

Dalio pioneered so-called risk-parity strategies with with his All Weather portfolio. Broadly, risk-parity “re-balances” adjust their holdings of stocks, bonds and commodities when the volatility of these assets trip certain levels. All Weather has a great long-term track record, but struggled last year because, basically, all assets went down together.