Stock prices look expensive and inflated: Billionaire investor Ray Dalio

Listen and subscribe to Opening Bid on

Apple Podcasts

,

Spotify

,

YouTube

or wherever you find your favorite podcasts.

A warning on the world’s biggest stocks from one of the biggest names on Wall Street.

“I think it depends on what stocks — yes, the leading stocks, they’re expensive,” billionaire hedge fund founder Ray Dalio told me on Yahoo Finance’s
Opening Bid
podcast (video above; listen in below).

Dalio says the Magnificent Seven names, such as Nvidia (
NVDA
), Amazon (
AMZN
), and others, have become “so expensive.”

If the 10-year yield continues to rise as Dalio expects, these top-momentum names could be hit hard.

“If you have an interest rate rise when it’s relatively expensive, it’s not likely to be good,” Dalio said, adding, “Rotation is the important consideration.”

Dalio stepped down as CEO of Bridgewater Associates in 2017 and handed over control of the firm in October 2022. His current role with the firm includes mentoring the committee that has oversight over the
company’s investment strategies
.

The investment veteran, with an
estimated net worth
of $14 billion, is no stranger to making against-the-grain markets and economic calls. Some have panned out, others, not yet — if at all.

In an April 2022 interview
, Dalio warned me about a period of stagflation —or slow growth and high inflation. That didn’t exactly pan out from a growth standpoint as the world recovered from the COVID-19 pandemic. But global economies continue to grapple with elevated levels of inflation that are crimping
consumer purchasing power
.

More recently, Dalio has been calling attention to the US’s bloated deficit, which hit a staggering $1.8 trillion in fiscal year 2024. He shares more of his debt concerns in a new online book called ”
How Countries Go Broke
.”

Worst-case scenarios on the US debt (such as a major inflation outbreak) haven’t occurred. But the markets are not ignoring the issue, with the Trump administration likely adding to debt levels by extending his signature tax cuts.

Read more:

Why TD Ameritrade’s former CEO is bullish on the Trump trade

Investors are fretting over a 10-year bond yield hovering close to 5%, a rising US dollar, risk of a trade war from the Trump administration,
policy uncertainty from the Fed
, and pullbacks in top
Mag Seven
names like Nvidia.

Stocks are “priced for perfection,” warned Goldman Sachs strategist
Peter Oppenheimer this month
.

Dalio thinks the US needs to get its debt situation in order. Since that’s unlikely to happen in the near-term, Dalio said the average investor should be taking a hard look at their portfolio.