Billionaire investor Ray Dalio warned on Thursday that stocks face mounting pressure from rising bond yields and the prospect of weaker corporate cash flows, even as earnings continue to grow.
The Bridgewater Associates founder told CNBC equities have so far weathered the global bond sell-off because earnings growth has kept expected stock returns attractive, relative to bonds. But that advantage will narrow, he said, potentially leaving equities more vulnerable as financial conditions tighten.
"We're in the part of the cycle where interest rates can rise without sending the equity market down because there's enough earnings growth and there's enough expected return," Dalio told CNBC's Sri Jegarajah at the Milken Institute Asia Summit in Singapore on Thursday.
"But when that cushion comes down, then you're coming later into that cycle. So that's where we are."
His warning comes as U.S. Treasury yields hover near multi-decade highs. Investors are grappling with large government deficits, persistent inflation and rising borrowing tied to artificial intelligence investment.