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

Wall Street veteran Jeffrey Gundlach said many assets are extremely overpriced right now, urging investors to keep about 20% of their portfolios in cash to protect against a major downturn.

Speaking on Bloomberg’s Odd Lots podcast, the DoubleLine Capital CEO warned that the stock market looks dangerously speculative, saying it’s among the least healthy he’s seen in his entire career. He sees speculative excess in AI-related stocks and data-center investments, cautioning that momentum investing during a boom can end badly.

Gundlach is especially worried about the rapid growth of private credit, a $1.7 trillion market that lends directly to companies. He said lenders are making “garbage loans” similar to what happened before the 2008 mortgage crisis, pointing to recent failures like auto lender Tricolor and car parts supplier First Brands Group as early warning signs.

“The next big crisis in the financial markets is going to be private credit,” he said. “It has the same trappings as subprime mortgage repackaging had back in 2006.”

Gundlach also criticized the push to sell private credit funds to retail investors, calling it a “perfect mismatch” where there’s a promise for easy withdrawals despite the fact those assets can’t typically be sold quickly. If investors pull money out, funds may be forced to sell at steep losses, he said.

Despite his warnings, Gundlach admits it’s hard to profit directly from this view. He won’t short junk bonds, for example, because the trade keeps losing money, he said.

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