Dalio says U.S. stock market buffer is weakening; bond bear market may still have room to develop

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

BlockBeats news,October 9, Bridgewater Associates founder Dalio said in an interview CNBC at the Milken Institute Asia Summit in Singapore that U.S. stocks had previously been able to withstand a bond-market sell-off, relying mainly on the relative return advantage generated by corporate earnings growth. But as both stock prices and U.S. Treasury yields have risen, this buffer is weakening, and credit spreads have also begun to widen. Financial conditions have not yet tightened enough to significantly restrain credit and spending.

Dalio emphasized that investors should focus on free cash flow, not just reported earnings. He expects corporate earnings may still improve, but free cash flow may decline; if profits continue to be invested in capital expenditures and cannot be converted into cash, liquidity problems will gradually emerge. Large technology companies’ continued investment in AI artificial intelligence infrastructure makes this risk more noteworthy.

Regarding the bond market, Dalio said that it is currently in a bond bear market, which may still have further room to develop. Governments issuing debt to finance fiscal deficits and technology companies issuing debt to build AI infrastructure are competing for long-term capital, and higher financing costs could ultimately weigh on credit expansion and spending. However, he did not predict that corporate earnings would soon decline, nor did he conclude that U.S. stocks were about to undergo a sharp correction.

Original link https://m.theblockbeats.info/flash/370977

Key points

Dalio said that the U.S. stock market’s buffer against a bond-market sell-off is weakening.
Stock prices and U.S. Treasury yields have risen simultaneously, and credit spreads have begun to widen.
Dalio expects corporate earnings may still improve, but free cash flow may decline.
Large technology companies continue to invest in artificial intelligence infrastructure.
Dalio believes the bond market is currently in a bond bear market, which may still have further room to develop.
Dalio did not predict that corporate earnings would soon decline, nor did he conclude that U.S. stocks were about to undergo a sharp correction.

AI-assisted interpretation

The following is analysis, separate from reported facts. Verify important claims independently.

Dalio believes that when stocks and bonds are under pressure simultaneously, the support provided by corporate earnings is weakening. Even if reported profits improve, a decline in cash flow could gradually affect corporate financing and spending.

Why it matters to readers

This suggests that investors should monitor U.S. stock valuations, U.S. Treasury yields, credit spreads, and whether corporate earnings can be converted into free cash flow.

Reported earnings do not equal cash actually received by a company. A decline in free cash flow could increase financing pressure on companies.

Risks and unknowns

Materials not attached CNBC The original interview link or independent verification materials.
The article does not state how long the bond bear market may last, nor does it provide specific market targets.

Dalio says U.S. stock market buffer is weakening; bond bear market may still have room to develop

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