🔄 Ray Dalio's Economic Cycle Analysis
Analyze current market conditions using Ray Dalio's economic cycle framework. This tool helps identify:
- Which phase of the economic cycle we're in
- Current market risks and opportunities
- Optimal asset allocation based on Dalio's principles
About this chart: This visualizes the composite economic cycle score with Dalio's methodology. Higher scores indicate increased market stress. The horizontal lines show thresholds for different economic phases.
Key indicators explained:
- Yield Curve: The difference between long and short-term rates (flattening indicates late cycle)
- Volatility: Market volatility (VIX) - higher values mean more stress
- Inflation: TIPS vs Treasury spread - indicates inflation expectations
- Credit: Credit spread between high yield and investment grade bonds
- Consumer: Consumer discretionary vs staples - indicates economic confidence
About the allocation: This shows Dalio's recommended asset allocation based on the current phase. The center indicates which phase we're currently in. Hover over each segment to see the recommended percentage and corresponding ETF.
About the All Weather Portfolio: This shows how Dalio's balanced portfolio components perform over time. The portfolio includes stocks (SPY), long-term bonds (TLT), intermediate bonds (IEF), gold (GLD), and commodities (DBC). This allocation aims to perform well across all economic environments.
Understanding Dalio's Framework
Ray Dalio, founder of Bridgewater Associates (the world's largest hedge fund), developed a comprehensive approach to understanding economic cycles. His framework divides the economy into four distinct phases:
- Early Recovery: Economy is improving from a downturn, policy is accommodative
- Mid Cycle: Steady growth with moderate inflation and tightening policy
- Late Cycle: Growth slowing, inflation rising, policy becoming restrictive
- Crisis: Economic contraction, high volatility, policy rapidly loosening
The tool analyzes multiple economic indicators to determine the current phase and offers portfolio recommendations based on historical performance during similar periods.