Ray Dalio warns that dollar depreciation has distorted investor perceptions of recent gains, shifting real returns when measured in alternative assets.

Currency depreciation and purchasing power

Dalio highlights that in 2025 the dollar weakened by 12% against the euro, by 13% against the Swiss franc and by 39% against gold. He argues that such declines reduce the dollar's purchasing power and create an illusion of nominal asset appreciation denominated in dollars.

Gold versus equities

According to Dalio, gold returned 65% in dollars in 2025, while the S&P returned 18% in dollars, implying gold outperformed the index by 47 percentage points. Measured in gold, he notes, the S&P effectively fell by 28%, altering the real assessment of equity gains.

Bonds and refinancing risks

Ten-year U.S. Treasury bonds yielded about 9% in dollars, but when priced in gold they delivered a return of -34%. Dalio also points to roughly $10 trillion of debt due for refinancing, increasing sensitivity to central bank rate policy and duration risk.

Profit concentration and distributional effects

Corporate profits for the S&P rose 12%, while the so-called "magnificent seven" delivered +22% and the remaining 493 companies averaged +9%. Revenue contributed 7% to growth and margin expansion added 5.3%, with about half the gains attributed to cost reductions and efficiency, including AI-related savings.

Dalio warns that this dynamic concentrates wealth among the top decile, while the lower 60% of earners continue to face rising prices and stagnant wages, exacerbating inequality over time.

Implications for investors

He advises investors to evaluate portfolios by real purchasing power rather than nominal dollar gains, noting expected long-term equity returns near 4.7% may be insufficient relative to systemic risks. Diversification into hard assets such as gold is described as a response by large funds and central banks to perceived dollar vulnerabilities.