On Wall Street, Ray Dalio is considered one of the most successful and well-known major investors. What the billionaire and hedge fund manager says and does therefore carries weight and is generally noticed. Currently, Ray Dalio sees a risk situation for 2025 that is unprecedented and could provide the script for a ‘perfect’ economic crisis.

Ray Dalio sees the US economy on the brink of a crisis unlike any since the 1930s. A dangerous convergence of unsustainable debt, deepening political divisions, and escalating geopolitical tensions has led to what the billionaire describes as a ‘paradigm shift’ for the markets.

US national debt amounts to 122 percent of the US gross domestic product, and the US government has to make interest payments that are so high they exceed defense spending. This increases the risk that the financial stability of the USA is no longer guaranteed.

A Toxic Mix Unfolds Its Effect

While this problem is exacerbating from month to month because US national debt increases by another trillion US dollars every three months, confidence in the US government has fallen to a historic low. Relations with China, one of the most important US creditors and trading partners, have reached a low point. They threaten important trade routes and global supply chains. This further aggravates the situation.

For Ray Dalio, this triple crisis marks the end of a long-term debt cycle and the beginning of a new era. It is a transition period full of uncertainties. At this point, it is important to address Ray Dalio’s conceptual framework for understanding crises. In his view, crises are based on three factors: debt cycles, internal conflicts, and external conflicts.

This year, all three factors are simultaneously reaching a new peak, because in addition to debt and external conflicts, the USA is also characterized by dangerous internal division. Such a constellation is rather rare but extremely dangerous. Almost 100 years ago, at the beginning of the Great Depression, the world was last confronted with such a difficult constellation.

Ray Dalio warns that such imbalances have historically always been resolved through painful measures such as inflation, austerity measures, or even defaults. ‘The debt situation is dangerous and unsustainable,’ he cautions, underscoring the severity of the USA’s financial situation. The billionaire assumes that the era of US-led globalization is effectively over and that financial markets are now pricing in geopolitical risks that were once considered mere background noise.

Gold and Gold Mines as an Answer to the Crises of Our Time

Ray Dalio’s firm Bridgewater Associates now holds significant positions in gold ETFs and mining stocks in its portfolio. This investment decision reflects that Gold has historically functioned very well as a reliable hedge against currency devaluations, market instability, and geopolitical risks.

The logic of this double vote for gold can be well understood. When fear and panic take over in a crisis, sooner or later investors turn to gold. This causes its price to rise sharply, and while nearly all industries suffer from the bad and ever-worsening environment, gold producers generate solid revenues and high profits thanks to high margins.

Are Retail Investors Reacting Very Late Again This Time?

Many small investors are currently preoccupied with the question of whether it makes sense to invest in the deeply fallen stars of the past stock market rally, for example the Magnificent 7 or AI stocks. Visually, the prices indeed look inviting. But will the favorites of the past also be the outperformers of the future?

A look at stock market history urges caution at this point. At the end of the 1960s, the Nifty Fifty stocks were on everyone’s lips and in high demand. However, in the 1970s, energy stocks and shares of gold and silver producers performed much better, while the Nifty Fifty stocks mutated into shelf warmers. A similar fate befell telecommunications stocks at the end of the 1990s. At that time, one telecom rose to over 120 euros at its peak, a price from which the stock is still miles away today.

This list can be continued for a while. What’s crucial is not which industry has been affected by this fate for what reason, but the realization that on the stock market, investors’ favorites continually change. Experience shows that many private investors become aware of these shifts in smart money’s favorites quite late, sometimes even far too late.

They don’t trust the situation and often only buy these stocks in a later, more mature phase of the new market cycle, when prices have already performed quite well. In this case, it can be helpful to keep an eye on investment giants like Ray Dalio and follow their example early on, rather than waiting until the new market trend is common knowledge.