Bridgewater founder Ray Dalio: We are definitely in a bubble, but that doesn't mean you should sell

Core Viewpoint - The current market is experiencing a bubble, characterized by unsustainable valuations and excessive leverage, with indicators suggesting it is at approximately 80% of the levels seen during historical bubbles like 1929 and 2000 [1][2][5]. Market Dynamics - A bubble is defined by unsustained buying and valuation, which can lead to significant price increases before a potential burst [2][3]. - The need for cash often triggers the bursting of a bubble, as wealth cannot be spent directly and must be converted into cash through asset sales [4][5]. Leverage and Ownership - The concentration of wealth among a small percentage of the population and the use of leverage are critical factors in the current bubble environment [1][3]. - Strong hands, or those who primarily invest their own money, contrast with weak hands, which include retail investors who are more likely to sell during downturns [1][3]. Historical Context - Historical examples, such as the stock market rise from 1928 to 1929, illustrate that significant gains can occur even in bubble conditions before a downturn [2]. - The correlation between high price-to-earnings (PE) ratios and low long-term returns has been noted, with JP Morgan indicating that entering the market at a PE over 23 typically results in returns between 2% and -2% over a decade [3].