Bridgewater founder Dalio warns: U.S. stock market buffer is running out, bond bear market is not over

October 9 — Bridgewater founder Ray Dalio said in an interview with CNBC at the Milken Institute Asia Summit in Singapore that U.S. stocks had previously been able to withstand the bond market selloff mainly because of the relative return advantage brought by corporate earnings growth. But as stock prices and U.S. Treasury yields rise simultaneously, that buffer is weakening, and credit spreads have also begun to widen. At present, financial conditions have not yet tightened enough to significantly curb credit and spending.

Dalio stressed that investors should focus on free cash flow, not just accounting profits. He expects corporate earnings may still improve, but free cash flow may decline; if profits continue to be reinvested in capital expenditures and cannot be converted into cash, liquidity problems will gradually take shape. Large technology companies' continued investment in AI infrastructure makes this risk more noteworthy.

As for the bond market, Dalio believes it is currently in a bond bear market and may still have room to develop further. Governments financing fiscal deficits and technology companies issuing debt for AI buildouts are competing for long-term capital, and higher financing costs may ultimately suppress credit expansion and spending. However, he did not predict that corporate earnings are about to decline, nor did he judge that U.S. stocks are about to see a major correction.