Key facts
- Ray Dalio stated the stock market's margin for error is shrinking.
- He cited increased competition for capital due to AI infrastructure buildouts and heavy government borrowing.
- The 10-year Treasury yield reached 5.36%, its highest since 2002.
- The S&P 500 is up over 13% this year.
- Dalio noted that corporate credit spreads remain relatively narrow, indicating continued investor willingness to finance companies.
Billionaire investor Ray Dalio said the stock market's ability to absorb rising interest rates is diminishing, attributing this to increased competition for capital driven by the AI boom and substantial government borrowing.
Dalio, founder of Bridgewater Associates, told CNBC on Thursday that while strong corporate earnings have so far offset the impact of higher rates, the market's 'cushion' has decreased. He noted that the benchmark 10-year Treasury yield hit 5.36% this week, its highest level since 2002, as persistent inflation and the Federal Reserve's hawkish stance weigh on investors.