Jeffrey Gundlach, the CEO and founder of DoubleLine Capital, cautioned on Monday that the U.S. equity market is “among the least healthy” he has ever seen in his career.
According to a Bloomberg Odd Lots podcast cited by Fortune, the "Bond King" noted extreme valuations, saying price-to-earnings and market capitalization metrics are "off the charts."
Gundlach described the market as "incredibly speculative" and likened the current enthusiasm for artificial intelligence (AI) to previous manias, including electricity stocks, which peaked in the early 20th century and never recovered.
He cautioned that momentum investing during mania periods can be risky, as speculative markets tend to reach "insanely high levels."
Gold Gains Favor as Real Asset
In response to soaring financial asset valuations, Gundlach has focused on gold, calling it his "number one best idea for this year." He further emphasized that gold has become a recognized "real asset class" and noted its strong performance over the past 12 months.
Central banks’ aggressive purchases of gold have contributed to its recent surge; some predictions indicate that it may reach $5,000 per ounce by 2026.
Gundlach recommended that investors hold about 15% of their portfolios in gold, down from an earlier, higher allocation of 25%.
Meanwhile, in October, legendary investor Bill Gross noted that gold's recent rally appears overextended, calling it a "momentum/meme asset" in a post on X.
Shifting Portfolios Toward Real Assets
Gundlach advised a radical reallocation of traditional investment portfolios.
He suggested keeping fixed income at 25% and stocks at 40%, with the remaining funds going toward real assets like gold and cash, reflecting elevated market valuations.
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