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Dalio Warns of Diminishing Cushion for Stocks
Ray Dalio, a prominent investor, indicated at the Milken Institute Asia Summit in Singapore that while profit growth has allowed stocks to counteract increasing bond yields, this benefit is gradually diminishing. Dalio expects a decline in free cash flow, even as profits continue to rise. He warned that the bond sell-off will persist, reflecting his concerns about the current economic cycle. Dalio emphasized the importance of focusing on free cash flows rather than earnings, as companies could face liquidity issues despite improving headline earnings. He also noted that the global bond sell-off is likely to continue due to heavy government and corporate borrowing, which puts pressure on investor demand and could lead to reduced credit and spending, potentially affecting equity markets in the future.