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 on 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 blowoff" 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."

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