Ray Dalio Comments on 2025 and beyond

 Below is a summary of a recent article by Ray Dalio. For those that may not be familiar with Mr. Dalio, he started what became the world's largest hedge fund from his apartment. That said, when he talks, we listen. We found these takes particularly interesting: 

2025 Wasn’t About AI Stocks — It Was About the Value of Money

In his year-end reflection, Ray Dalio argues that most investors misunderstood the real story of 2025. While headlines focused on the surge in U.S. stocks—especially AI-related names—the true driver of global market performance was the decline in the value of money itself, particularly fiat currencies.

The Biggest Market Move of 2025: Currency Debasement

Dalio points out that nearly all major fiat currencies weakened last year, with the U.S. dollar falling meaningfully against both hard currencies and gold. Gold, which Dalio views as the only major non-fiat reserve currency, rose roughly 65% in dollar terms, making it the best-performing major asset class of the year.

This matters because returns depend on the currency you measure them in. While the S&P 500 rose about 18% for U.S.-based investors, those same returns were far less impressive—or outright negative—when measured in stronger currencies like the Swiss franc or gold. In gold terms, U.S. equities actually lost nearly 30% of their value.

Dalio’s core point: when money weakens, assets priced in that money can appear to rise even if real purchasing power is falling.

Bonds and Cash Quietly Lost Purchasing Power

Although U.S. Treasury bonds produced positive nominal returns, Dalio emphasizes that bonds are ultimately promises to deliver future money. When money is being debased, the real value of those promises declines. Measured in strong currencies or gold, long-duration bonds and cash were among the worst investments of the year.

With nearly $10 trillion of U.S. debt needing to be rolled in coming years—and the Federal Reserve likely biased toward easier policy—Dalio sees long-term debt as structurally unattractive, especially if inflationary pressures persist and the yield curve steepens further.

U.S. Stocks Underperformed the World

Despite solid earnings growth, U.S. equities significantly underperformed international markets. European, Chinese, Japanese, and emerging-market stocks all delivered stronger relative returns, reflecting a meaningful shift in global capital flows away from U.S. assets.

Dalio views this as part of a broader rebalancing: foreign investors reducing exposure to U.S. stocks, bonds, and cash, while increasing diversification into non-U.S. markets and gold.

Earnings Were Strong — But Political Risk Is Rising

U.S. corporate earnings grew by about 12% in 2025, driven by both higher sales and expanding profit margins. However, Dalio warns that margins may become a political flashpoint. Productivity gains—some driven by technology and AI—have disproportionately benefited capital owners rather than workers, widening wealth and income gaps.

That dynamic, he argues, is fueling rising political tension between pro-capitalist and redistributive forces, a conflict that could directly affect taxes, regulation, and future corporate profitability.

Valuations Look Stretched Heading Into 2026

With equity valuations high, credit spreads tight, and liquidity abundant, Dalio estimates long-term expected equity returns at roughly 4–5%, well below historical norms and only marginally above bond yields. In his framework, that implies low future returns and elevated downside risk if interest rates rise or liquidity tightens.

Illiquid assets—such as private equity, venture capital, and some real estate—have not benefited as much from reflation and may face increasing pressure as refinancing costs rise and liquidity premiums normalize.

Politics, Geopolitics, and the “Big Cycle”

Dalio places 2025 squarely within what he calls the Big Cycle - a period marked by high debt levels, monetary debasement, political polarization, and rising geopolitical conflict.

He highlights:

• A shift toward government-directed capitalism in the U.S.

• Growing use of sanctions, tariffs, and unilateral economic power

• Increased military spending and borrowing globally

• Continued demand for gold amid declining trust in fiat systems

• Early signs of a speculative AI-driven bubble

These forces, he argues, will remain dominant drivers of markets and economic outcomes in the years ahead.

The Takeaway

Dalio’s core message is simple but uncomfortable: nominal gains can hide real losses. Investors who focus only on headline returns may miss what’s happening to purchasing power, currency strength, and long-term risk.

Rather than chasing recent winners, he urges investors to understand how money, debt, politics, and productivity interact—and to build portfolios that can withstand the full cycle, not just the next rally.

Our take

Hard to add much to Dalio. We have the utmost respect for his takes on the markets and global movements. In sum, we think cautious optimism in certain areas that provide zoning opportunities is a solid strategy as we face many uncertainties both nationally and globally. 

For more information on Everett Commercial Real Estate invests, we are always happy to chat. 

Scott Weitz

Scott@Weitzcommercial.com

C: 206.306.4034.