Dalio: Interest rate changes will become an important variable affecting the market

Will AI become the next productivity revolution, or is it forming a new market bubble? Ray Dalio stated in a business interview podcast broadcast on July 30 that both may exist simultaneously. Technological progress will not stop, but investors, enterprises, and individuals need to face challenges brought by valuation adjustments, changes in employment, and economic structure transformations.

Dalio believes that the current market already shows some features consistent with historical bubble patterns. Although AI has revolutionary value in changing production methods, investors may be ignoring the gap between technological value and market price. When asset valuations are far higher than their actual earning capabilities, the risk of a bubble may quickly surface once the funding environment tightens.

Dalio pointed out that in recent years, the wealth growth of many entrepreneurs and investors has mainly come from rising stock valuations, rather than directly usable cash flows. An increase in book wealth does not mean having consumption capacity of equal scale, and once the market adjusts or there is a demand for cash, holders will still need to sell assets to obtain cash. This is also an important mechanism in the formation and bursting of asset bubbles. In his view, changes in interest rates will become a major variable affecting the market.