Bridgewater Associates founder Ray Dalio says equities are becoming more vulnerable as yields climb and corporate free cash flow weakens.
Ray Dalio warned that the cushion that has supported U.S. stocks as bond yields rise is shrinking. The Bridgewater Associates founder said further rate increases could put more pressure on equities, particularly if corporate cash flows weaken.
Speaking to CNBC at the Milken Institute Asia Summit in Singapore, Dalio said earnings growth had kept expected stock returns attractive relative to bonds. But as share prices and bond yields climb, that buffer is narrowing. He also said credit spreads are beginning to widen.
Investors should watch free cash flow as well as reported earnings, he said. Companies can post higher profits while investing heavily and generating less cash. Dalio expects free cash flow to deteriorate even if earnings continue to improve.
He stopped short of predicting an imminent fall in corporate profits or a near-term market correction. Financial conditions, he said, have not yet tightened enough to significantly curb lending and spending. However, he expects the global bond sell-off to continue as governments borrow to finance deficits and companies compete for capital to invest in new technologies.
Dalio described the current environment as a bond bear market and said he believes it has further to run. In his view, higher borrowing costs will eventually reduce credit and spending, with possible consequences for economic activity and equities. For now, earnings growth continues to support stocks even as credit conditions begin to weaken.
CNBC’s accompanying caption said Dalio also gave an interview on the floor of the New York Stock Exchange on April 27, 2026. His current remarks on bond yields and equities were made in Singapore.