The world’s largest hedge fund Bridgewater founder Ray Dalio has released his annual reflection, pointing out that by 2025, the biggest winner will be gold rather than US stocks, as all fiat currencies are depreciating. He also warns that AI is in the early stages of a bubble and predicts that debt, currency, politics, geopolitics, and technology will reshape the global landscape. This article is compiled, translated, and written by BitpushNews.
(Previous summary: Bridgewater Dalio: My Bitcoin holdings have remained unchanged! Stablecoins are not cost-effective for preserving wealth)
(Additional background: Bridgewater’s Dalio calls for US dollar decline “Gold is indeed safer”: I feel the market is in a bubble)

Table of Contents

• 1. Changes in Currency Values
• 2. US Stocks Significantly Underperform Non-US Markets and Gold
• 3. Valuations and Future Expectations
• 4. Changes in Political Order
• 5. Global Order and Technology
• Summary

As a systematic global macro investor, as we bid farewell to 2025, I naturally reflect on the underlying mechanisms of the events that have occurred, especially the market performance. That is the main purpose of this reflection.

While facts and returns are undeniable, my perspective on the issues differs from most.

Although most believe that US stocks, especially US AI stocks, are the best investments for 2025 and the core story of the year, an undeniable fact is that the most substantial returns ( and the real headline story ) come from:

1. Changes in currency value ( Most importantly, the US dollar, other fiat currencies, and gold )

2. US stock performance significantly lagging behind non-US stocks and gold ( Gold is the best-performing major market ). This is mainly due to fiscal and monetary stimulus, productivity improvements, and large-scale asset reallocation from the US market.

In these reflections, I want to step back and examine how last year’s currency / debt / market / economic dynamics operated, and briefly touch on the other four major drivers—politics, geopolitics, natural forces, and technology—how they influence the global macro landscape under the evolving “Big Cycle (Big Cycle)” background.

1. Changes in Currency Values

Regarding currency values: the USD/JPY fell 0.3%, USD/CNY fell 4%, USD/EUR fell 12%, USD/CHF fell 13%, while gold plummeted 39% ( Gold is the second-largest reserve currency and the only major non-credit currency ).

Therefore, all fiat currencies are depreciating. The biggest story and market volatility this year stem from the weakest currencies experiencing the largest declines, while the strongest/hardest currencies appreciated the most. The most outstanding major investment last year was going long gold ( USD returns 65% ), outperforming the S&P 500 ( USD returns 18% ) by 47 percentage points. In other words, measured in gold, the S&P index effectively declined by 28%.

Let’s remember some key principles related to the current situation:

• When a domestic currency depreciates, it makes assets priced in that currency appear to rise. In other words, viewing investment returns through a weak currency lens makes them seem stronger than they actually are. In this case, the S&P’s 18% return for USD investors, 17% for JPY investors, 13% for CNY investors, but only 4% for EUR investors, and just 3% for CHF investors, while for gold-based investments, the return is -28%.
• Currency changes are crucial for wealth transfer and economic direction. When a currency depreciates, it reduces an individual’s wealth and purchasing power, making their goods and services cheaper in others’ currencies, while making others’ goods and services more expensive in their own currency. This influences inflation and trade relations, though with a lag.
• Whether you hedge currencies (Currency Hedged) is very important. If you do not, and do not want to comment on currencies, what should you do? You should always hedge into the currency basket with the least risk, and tactically adjust when you believe you can do well. I will explain later how I operate.

Regarding bonds (debt assets): since bonds are promises to deliver currency, when currency value declines, their real value decreases even if nominal prices rise. Last year, the 10-year US Treasury yield in USD was 9% ( about half from yield, half from price ), with returns of 9% in JPY, 5% in CNY, but -4% in EUR and CHF, and -34% in gold (, cash was an even worse investment.

You can understand why foreign investors dislike USD bonds and cash ) unless they hedge currency (.

So far, the imbalance of bond supply and demand is not a serious issue, but in the future, a large amount of debt )nearly $10 trillion### will need refinancing. Meanwhile, the Fed seems inclined to cut rates to suppress real interest rates. Therefore, debt assets lack attractiveness, especially the long end of the curve, and further steepening of the yield curve seems inevitable, but I doubt whether the Fed’s easing can be priced in as much as current expectations.

( 2. US Stocks Significantly Underperform Non-US Markets and Gold

As mentioned earlier, while US stocks perform strongly in USD terms, they lag considerably in strong currencies and significantly underperform stocks in other countries. Clearly, investors prefer holding non-US stocks, non-US bonds over US assets.

Specifically, European stocks outperformed US stocks by 23%, Chinese stocks by 21%, UK stocks by 19%, Japanese stocks by 10%. Emerging markets overall performed better, with a return of 34%, emerging market USD bonds returning 14%, and emerging market local currency bonds ) USD-denominated ( overall returning 18%. In other words, wealth is shifting significantly from the US outward, which may lead to more rebalancing and diversification.

Regarding last year’s US stocks, the strong results were driven by earnings growth and P/E expansion.

Specifically, earnings in USD grew 12%, P/E expanded about 5%, plus about 1% from dividends, giving the S&P a total return of about 18%. The “Big Seven” tech giants, accounting for about 1/3 of market cap, saw earnings grow 22% in 2025, while the other 493 stocks’ earnings grew 9%.

Earnings growth was 57% due to sales growth ) grew 7%(, and 43% due to profit margin expansion ) grew 5.3%(. Much of the margin expansion may be attributed to technological efficiency, but data limitations prevent definitive conclusions.

In any case, profit improvement mainly reflects the “economic cake” getting bigger, with capitalists capturing most of the gains and workers sharing less. Monitoring profit margins will be very important going forward, as markets currently expect this growth to continue, while leftist political forces are trying to reclaim a larger share.

) 3. Valuations and Future Expectations

Although the past is easier to understand than the future, understanding causality helps us forecast ahead. Currently, P/E ratios are high and credit spreads are very low, indicating overextended valuations. History shows this predicts lower future stock returns. Based on current yields and productivity levels, my long-term stock return expectation is only 4.7% ### in the lowest historical percentile (, very low compared to 4.9% bond yields, making stocks’ risk premium extremely low.

This means that little return can be extracted from risk premiums, credit spreads, and liquidity premiums. If currency depreciation causes supply-demand pressures to push interest rates higher, it will have a huge negative impact on credit and equity markets.

The two major uncertainties are Fed policy and productivity growth. The new Fed Chair and committee seem inclined to suppress nominal and real interest rates, which will support prices and inflate bubbles. Productivity in 2026 will improve, but how much of that will translate into profits rather than tax hikes or wage spending ) classic left-right issues ( remains uncertain.

In 2025, Fed rate cuts and credit easing lowered discount rates, supporting assets like stocks and gold. These markets are no longer cheap. Notably, these reflation measures have not benefited venture capital )VC(, private equity )PE(, and real estate markets with lower liquidity. If their debts are forced to refinance at higher rates, liquidity pressures could cause these assets to fall significantly relative to liquid assets.

) 4. Political Order Changes

In 2025, politics played a central role in driving markets:

• Trump administration’s domestic policies: a leveraged bet on revitalizing capitalism, US manufacturing, and AI technology.
• Foreign policy: scared off some foreign investors, with sanctions and conflicts raising concerns that supported diversification and gold purchases.
• Wealth gap: the top 10% capitalists own more stocks and have faster income growth; they do not see inflation as a problem, while the bottom 60% feel overwhelmed.

“Currency value / purchasing power” will become the top political issue next year, potentially leading to the Republicans losing the House and triggering chaos in 2027. On January 1, Zohran Mamdani, Bernie Sanders, and AOC united under the banner of “Democratic Socialism,” signaling a fierce battle over wealth and money.

5. Global Order and Technology

In 2025, the global order shifted clearly from multilateralism to unilateralism ###power politics(. This has led to increased military spending, debt expansion, protectionism, and de-globalization. Gold demand has strengthened, while demand for US debt and dollar assets has decreased.

In technology, the AI wave is currently in the early stages of a bubble. I will soon release my bubble indicator report.

) Summary

In summary, I believe that debt / currency / market / economic forces, domestic politics, geopolitics ###military spending(, natural forces )climate(, and new technological forces )AI( will continue to be the main drivers reshaping the global landscape. These forces will largely follow the “Big Cycle” template outlined in my book.

Regarding portfolio positioning, I do not intend to be your investment advisor, but I hope to help you invest better. The most important thing is to have independent decision-making ability. You can infer my position directions from my logic. If you want to learn how to do better, I recommend the “Dalio Principles” course offered by the Singapore Wealth Management Institute )WMI(.