Ray Dalio spent 2025 expressing fear and urging caution, and he’s remaining cautious as the US economy enters a new year.
The founder of Bridgewater Associates sounded alarms throughout 2025 over what he sees as a budding global debt crisis and the waning value of fiat currency.
The surge in gold last year—the biggest gain for the metal since 1979—contains a warning for investors, specifically as it relates to the depreciating value of fiat money, Dalio said in a post on Monday.
A potent cocktail of central bank buying, geopolitical worries, and appetite from individuals pushed gold to records all year, but Dalio argues that the gold rally is mainly a result of fiat money losing real value. In his view, that was the biggest story in markets in 2025.
“The best major investment of the year was long gold (returning 65% in dollar terms), which outperformed the S&P index (which returned 18% in dollars) by 47%,” he said. “Or, said differently, the S&P fell by 28% in gold-money terms.”
Dalio urged investors to consider a few key factors when evaluating the forces that drove markets in 2025. Specifically, he highlighted that examining investment through calculations made in a depreciating currency can be misleading, as it can make returns appear stronger than they actually were.
From Dalio’s perspective, the stock market’s 2025 performance varied greatly based on the measuring stick.
“When one’s own currency goes down, it makes it look like the things measured in it went up,” he said. “In this case, the S&P returned 18% for a dollar-based investor, 17% for a yen-based investor, 13% for a renminbi-based investor, only 4% for a euro-based investor, only 3% for a Swiss franc-based investor, and, for a gold-based investor, it returned -28%.”
President Donald Trump has touted the economic benefits of a weakening US dollar, attempting to frame it as beneficial for US exports. But economic think tanks such as the Cato Institute have argued against this perspective, claiming that it ignores negative spillover effects for US consumers.
Dalio seems to share that mindset, noting that a weaker currency tends to lower the cost of a nation’s exported goods for international buyers while increasing the price of domestic imports.
“When one’s currency goes down, it reduces one’s wealth and one’s buying power, it makes one’s goods and services cheaper in others’ currencies, and it makes others’ goods and services more expensive in one’s own currency.”
In his view, rising gold prices reflect a weakening economy and a national currency that is decreasing in value. For that reason, Dalio sees the continued strength of the so-called debasement trade as a warning for the US.
The stock market’s big bull run in recent years might also be making it easier for investors to disregard other warning signals flashing in the economy. Dalio emphasized that the gold rally is a reason to reassess the macro picture and take a more cautious position.
The billionaire investor added that stocks and gold benefited from monetary policy easing in 2025, but as both assets are no longer cheap, they’re at risk of a pullback if conditions shift again.
“Whether or not you are currency hedged matters a lot,” Dalio said. “You should always be hedged to your least-risk currency mix and make tactical moves from there if you think you are capable of making them well.”
Read the full article here
