The depreciation of the dollar: the real story behind the apparent gains of 2025

Ray Dalio points out a often overlooked reality by headlines: while markets show impressive performance on paper, the depreciation of the US dollar tells a very different story. This systematic weakening against major currencies and especially against gold—with a 39% drop compared to it—raises questions about the apparent strength of stock gains.

Returns That Are Not What They Seem

Investors see flattering figures on their portfolios, but this is an illusion created by depreciated currency. Dalio emphasizes that when performance is truly evaluated through the lens of a weakened currency, real returns are much less robust. In other words, you earn in dollars, but these dollars are gradually worth less.

The Political Implications of This Depreciation

The economic phenomenon will not remain confined to markets. Dalio predicts that the issue of the dollar’s value will increasingly dominate political debate, with potential repercussions on electoral dynamics, including issues surrounding Trump’s position in future midterm elections. When currency weakens, political tensions intensify.

The Root Cause: Policies That Burst Prices

These economic challenges stem from deeply expansionary fiscal and monetary policies. The massive injection of liquidity has inflated asset prices in nominal value, but this nominal price inflation hides a darker reality: no real value creation has taken place. The system has simply diluted the currency.