July 25,2025

💬 Daily Observation

“Evolve or die. This evolutionary cycle is not just for people but for countries, companies, economies, for everything.” — Ray Dalio

Building on yesterday’s quote about seeking answers to new questions, today we turn to Dalio’s insight (and a book recommendation, if you haven’t read it yet, Principles is a must‑read for navigating today’s markets): evolution isn’t mere change, it’s a disciplined cycle of goal‑setting, problem diagnosis, solution design, and relentless follow‑through.

In Principles: Life and Work, Dalio lays out five steps to turn disruptions into growth, and you can apply each one to your portfolio:

1. Setting clear goals: Define your “north star” allocation and return targets.
2. Identify and don’t tolerate problems: Pinpoint the holdings or risks dragging down your objectives.
3. Diagnose to get at root causes: Ask “why” until you uncover the true drivers—rate shifts, sector rotations, or credit strains.
4. Design plans to get around them: Trim, add, or rebalance positions where they’ll make the biggest difference.
5. Do what’s necessary to push designs through to results, and repeat: Implement your plan, track outcomes, then refine and repeat.

Think of your portfolio as an ecosystem: lasting growth comes not from one‑off tweaks, but from constant, thoughtful adaptation, testing the soil, pruning what fails to thrive, and planting new ideas that can withstand whatever comes next.

☕️ So grab your coffee and let’s dive into today’s fresh edition of Diversification Daily.

🗞️ Today's stories that matter (and why)

1. 👷 Jobless claims fall to six‑week low; labor market still showing strength

New claims for unemployment benefits dropped 4,0000 to 217,000 for the week ending July 19, the lowest since mid‑April, and marked the sixth consecutive weekly decline.

At the same time, continuing claims ticked up slightly to 1.955 million, suggesting longer periods out of work for some.

Why it matters: A resilient labor market reduces the case for near-term Fed rate cuts, reinforcing bond yields and supporting income‑oriented assets.

Assets in Focus: Fixed Income

2. ⚠️ Ray Dalio warns of US “economic heart attack” from runaway debt

‍

Bridgewater founder Ray Dalio says the US may face a fiscal collapse in the next three years, an “economic heart attack”, unless the budget deficit shrinks to ~3% of GDP.

He urges modest reforms now to avoid interest burdens and investor fatigue.

Why it matters: Rising fiscal risk may boost risk premia across bonds and equities, making real‑asset hedges like gold or inflation‑protected securities more attractive.

Assets in Focus: Fixed Income

3. 🏠 New‑home sales stay weak, inventory hits 9.8‑month high

Sales of new single-family homes in June rose just 0.6% to 627,000 units, beneath expectations, while unsold inventory climbed to 511,000, the highest since 2007. The median price slipped 2.9% year-on-year to $401,800.

Why it matters: Builders are offering deeper discounts as demand softens, opening potential value opportunities amidst broader housing fragility.

Assets in Focus: Real Estate

4. 🏛️ Trump visits Fed headquarters in rare political theater

On July 24, President Trump toured the Federal Reserve’s $2.5 billion renovation site and clashed with Chair Powell over cost concerns.

He renewed calls for lower interest rates and implied potential removal, although Powell remains in position under law..

Why it matters: Direct political engagement with the Fed raises questions about its independence. Markets may view heightened scrutiny of Fed governance as a risk signal.

Assets in Focus

Fixed Income

5. 🔥 Goldman flags rising speculation; bubble risk returns

‍Goldman Sachs’ Speculative Trading Indicator, which tracks flows into SPACs, penny stocks, and leveraged options, has surged to levels seen in the dot‑com bubble and 2021 meme-stock mania.

While speculative trades may boost short-term returns, longer-term performance could suffer.

Why it matters: With speculative froth riding alongside steady markets, portfolios anchored in fundamentals and liquidity may fare better than those chasing momentum.

Assets in Focus: Equities

🌀 Diversification Score – Have you evaluated your portfolio's diversification?

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🤯 Alternative investment highlight: 🏦 Goldman’s private credit CIT debuts in 401(k) plans

Goldman Sachs Asset Management is rolling out the GS Private Credit CIT in the fourth quarter of 2025, marking one of the first times everyday retirement savers can access private credit strategies through their 401(k) plans.

Structured as a Collective Investment Trust, the new vehicle will pool Goldman’s $142 billion private credit platform, spanning North American and European direct lending, mezzanine debt, and private placements, while maintaining a liquidity sleeve to accommodate daily redemptions typical of defined‑contribution plans. Initially offered within Great Gray Trust Company’s Panorix Target Date Series, the fund carries an all‑in fee near 1%, set to cover management and administrative expenses.

This innovation broadens diversification beyond traditional stocks and bonds by offering yields that have historically outpaced high‑grade corporate debt by 200–300 basis points. While a 1% fee sits above most core bond fund charges, it is competitive with other alternative‑asset vehicles and reflects private credit’s higher return potential, often in the 5–7% net range.

From a portfolio perspective, introducing private credit into 401(k)s can enhance income and reduce overall correlation to public markets, especially in periods of equity volatility.

However, plan sponsors and participants must weigh the benefits against potential liquidity constraints and the risk of wider credit spreads in an economic downturn.

📤

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🧠 From the Education Center: Is scarcity mindset killing your investment returns?  

Playing it safe can quietly cost more than any market crash. Holding too much cash out of fear may feel responsible, but it often means missing the upside.

Over time, missed growth can erode wealth more than short-term losses ever would.

Explore how scarcity thinking sabotages long-term returns: 🔗Learn more

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