The U.S. economy is taking a turn for the worse and there's a 40% chance America could experience a recession before the 2020 presidential election, according to Ray Dalio, founder of the world's largest hedge fund, Bridgewater Associates.

"Recessions are always inevitable, the only question is: 'When?'" Dalio told CNBC's Christine Tan on Thursday.

"I think that in the next two years, let's say prior to the next election, there's probably a 40% chance of a recession," he said on "Managing Asia."

Fears of a looming recession in the U.S. were heightened after a closely watched indicator flashed a warning signal: The yield on the 10-year Treasury note briefly broke below the 2-year rate early Wednesday. That bond market phenomenon has been a reliable early indicator for economic recessions in the past.