Gundlach sees one of the ‘least healthy’ stock markets of his career

Wall Street veteran Jeffrey Gundlach called on investors to hold about 20% of their portfolios in cash to protect against a major downturn, saying many assets are prohibitively expensive right now.

Speaking on Bloomberg’s Odd Lots podcast The CEO of DoubleLine Capital warned in a report Monday that the stock market looks dangerously speculative, saying it is among the least healthy he has seen in his entire career. The Dartmouth graduate, who began his career on Wall Street at TCW Group in the mid-1980s, sees speculative excess in AI-related stocks and data center investments today and warns that momentum investing during a boom could end badly.

Gundlach said he is particularly concerned about the rapid growth of private credit, a $1.7 trillion market that lends directly to companies. Lenders are making “junk loans” similar to those experienced before the 2008 mortgage crisis, he said, citing recent failures such as auto lender Tricolor and auto parts supplier First Brands Group as early warning signs.

“The next big crisis in financial markets will be in private loans,” he said. “This has the same pitfalls as the subprime mortgage repackaging of 2006.”

Gundlach also criticized the effort to sell private credit funds to retail investors, calling it a “perfect mismatch” in which the promise of easy withdrawals comes despite the fact that these assets often cannot be sold quickly. If investors withdraw money, the funds may have to sell at large losses, he said.

Despite his warnings, Gundlach admits that it is difficult to profit directly from this view. For example, he said he would not short short junk bonds because the trade continues to lose money.

He said he still likes gold but has reduced the recommended allocation to 15%. Gundlach had recommended a 25% gold position in mid-September based on the belief that inflation would remain stubbornly high due to the impact of tariffs on import prices.