Ray Dalio's cycles and the importance of keeping course
Intro
Markets are moving. The world order is changing. Those who invest now are doing so at a time of profound change. Not for the first time. The broad outlines have been sharply outlined by Ray Dalio, founder of Bridgewater, for decades. His analyses of debt cycles and geopolitical relationships help investors distance themselves. And to stay on course.
Phases in the cycle
Dalio sees history as a series of cycles of roughly 80 years. Every long life has four phases:
- Build up: community spirit and shared values (1945-1965)
- Awakening: rebellion and individualism (1965—1985)
- Decomposition: consumerism and fragmentation (1985-2005)
- Upheaval: inequality, distrust and polarization (2005-?)
According to Dalio, we are now at the end of phase four. The phase where old systems falter and new forces arise. China challenging the world dominance of the US, the rising tensions between north and south and east and west in general, hight social and economic value gaps, global and internal, rising populism, deteriorating education, declining authority and power of international organisations: these are all signs of a world order coming to an end.
Why the long term isn't always enough
Long-term investing gives you peace of mind. But not always direction. Those who got in in 1929 or 1965 had to wait decades to recover. So even for long term investors, a good strategy is decisive for results.
Figure 1: Dow Jones Index, recessions marked grey (logarithmic scale)
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In the past, the Dow Jones only broke its old peaks after decades. Those who did not anticipate lost value. And even more in purchasing power and opportunities. Bonds, commodities and real estate can also lag behind for a long time. Especially when inflation rises and debts accumulate. Then diversification is no longer enough. Then time is a threat. Then direction is needed. A process that recognizes the right moments without being dependent on uncertain predictions.
A New World Order
Since World War II, globalization, democracy, and American leadership have become the norm. That norm is shifting. The US puts self-interest first. Explicitly. China presents itself as a counterforce. Europe is looking for its position in a multi-polar world.
Trump marked this upheaval. His policy made it clear what the US is opting for: less international dependency, America first. This will reshape the global economy. Not gradually, but with friction.
The US has strong strengths: geographical security, energy independence, technological advantage, a world reserve currency and a relatively young population. But it withdraws from multilateral agreements. The international order is fragmenting and with it its authority. Europe is in a difficult position. Economically vulnerable, politically divided and demographically aging.
Two scenarios, one approach
What follows is uncertain. For now, a firm and balanced agreement between China and the US could restores the basis for the global economy and markets. An escalation could lead to a structural global recession, inflation, a geopolitical conflict and a shift in the global balance of power.
Both scenarios require agility. Investors who stick to fixed mixes of stocks, bonds and alternatives run risks that don't disappear over time. Cash seems safe, but it quickly loses purchasing power. Flexibility is essential, especially in a transition phase. Strategies that build on fixed allocations or linear expectations get stuck. The world is not developing gradually. She tilts. And those who ignore that look back too late.
Well prepared
There are also strong periods during each downturn. Every negative scenario offers opportunities. Provided that there is a process that remains intact. That adjusts automatically. Without emotion. Without interpretation. RAMM offers such a process. No predictions, no panic. But a system that protects against decline and moves with recovery. Especially when the world changes.
So that you keep your course. And continues to build on what matters.
