The dominant theme of 2025 appears to be the triumph of the U.S. stock market, particularly AI stocks. However, Ray Dalio, founder of Bridgewater Associates, holds a contrary view. He believes the biggest investment story of 2025 lies not in equities, but in the erosion of currency value and the shift in asset pricing benchmarks. Dalio chooses to review not a single market or hot industry, but how the entire "Money-Debt-Market-Economy" machine has operated over the past year.

While the stock market seems to be performing brilliantly, if we switch from a U.S. Dollar (USD) standard to a Gold standard, U.S. stocks actually fell by 28%. The devaluation of the U.S. dollar against gold reached a staggering 39%.

The Biggest Winners and Losers of 2025: Not Stocks, But the Value of Money

Dalio points out the most undeniable fact of 2025: all fiat currencies are depreciating, just at different speeds.

Taking the U.S. dollar as an example, in 2025 the USD depreciated against:

• Japanese Yen: -0.3%

• Chinese Yuan: -4%

• Euro: -12%

• Swiss Franc: -13%

• Gold: -39%

Gold, the world's second-largest reserve asset and the only major non-sovereign fiat currency, was the real winner. Consequently, the best-performing major market in 2025 was not U.S. stocks, but gold.

• Gold (priced in USD): +65%

• S&P 500: +18%

• U.S. Stocks (priced in Gold): -28%

Dalio emphasizes an often-overlooked but critical principle: When your pricing currency is devaluing, all assets calculated in it will appear overvalued.

Looking at the S&P 500 returns for different investors:

• For USD Investors: +18%

• For JPY Investors: +17%

• For CNY Investors: +13%

• For EUR Investors: +4%

• For CHF Investors: +3%

• For Gold Investors: -28%

Bonds and Cash: Nominally Safe, Substantially Eroded by Inflation

Dalio further points out that the essence of a bond is a promise to deliver currency in the future. When the currency itself devalues, the intrinsic value of the bond inevitably suffers.

2025 10-Year U.S. Treasury Returns:

• USD terms: +9%

• JPY terms: +9%

• CNY terms: +5%

• EUR/CHF terms: -4%

• Gold terms: -34%

This explains why overseas interest in USD bonds and cash remains low (unless hedged for exchange rates). Dalio’s outlook for the future is quite conservative: with approximately $10 trillion in debt due for refinancing, the Federal Reserve is inclined to suppress real interest rates. The risk of long-term bonds outweighs the reward, and the probability of the yield curve steepening further is not low.

2025 U.S. Bull Market: Actually Losing to the World?

Even with strong performance in USD terms, Dalio emphasizes that in 2025, U.S. stocks significantly lagged behind non-U.S. markets and gold.

• European Stocks: +23% (relative to U.S. stocks)

• Chinese Stocks: +21%

• UK Stocks: +19%

• Japanese Stocks: +10%

• Emerging Markets (Overall): +34%

It wasn't just stocks; Emerging Markets also outperformed in debt:

• USD Bonds: +14%

• Local Currency Bonds (in USD): +18%

There is only one conclusion: Global capital is reallocating away from the United States.

Why Do U.S. Stocks Still Rise? Strong Fundamentals, Broad Support

Ray Dalio does not deny the nominal performance of U.S. stocks in 2025. The S&P 500 returned about 18%, driven by 12% earnings growth, ~5% P/E expansion, and ~1% dividend yield. Notably, excluding the "Magnificent Seven" tech giants, the remaining 493 stocks also saw earnings growth of about 9%, indicating the rally was not supported by a single sector alone.

However, Dalio notes that a large part of this rise in earnings and asset prices stems from reflationary policies and lower discount rates, rather than structural improvements. In profit expansion, capital took a larger share relative to labor, creating a distinct gap between asset holders and the general public regarding the perception of inflation.

He believes this distributional imbalance will intensify political polarization. Future adjustments—whether through wages, taxes, or regulations—could impact corporate margin structures, challenging current market expectations for continued profit expansion.

Ray Dalio: AI is in the Early Stages of a Bubble

Dalio believes the 2025 market cannot be understood in isolation from politics. He views the current administration's policies as a highly leveraged gamble on capitalism. Stimulus policies, tariffs, subsidies, and deregulation are essentially government-led capitalism. The result is a further widening of the wealth gap; the top 10% (asset owners) feel little pain from inflation, while the bottom 60% are crushed by the cost of living.

Dalio predicts that currency value and affordability will become the biggest political issues. With the upcoming 2026 midterms and 2028 election, polarization is likely to intensify. The conflict between wealth and money will directly impact the market.

Disclaimer: None of the information contained here constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy.