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Gundlach Cautions That Inflated Markets and Unstable Loans Could Trigger a Financial Crisis

Gundlach Cautions That Inflated Markets and Unstable Loans Could Trigger a Financial Crisis

Bitget-RWA2025/11/19 19:38
By:Bitget-RWA

- Jeffrey Gundlach warns U.S. equity market is "least healthy" and predicts private credit crisis due to "garbage loans" and weak underwriting. - He advises 20% cash allocation, reduced AI/data-center speculation, and compares private credit growth to 2006 subprime crisis, citing recent firm failures. - Recommends rebalancing portfolios: 40% global equities, 25% non-dollar bonds, and 15% gold as hedge amid dollar weakness and inflation. - Criticizes AI mania as "dot-com bubble" repeat, with NYU's Damodaran

Jeffrey Gundlach, often referred to as the "bond king" and serving as CEO of

Capital, has delivered a grave assessment of the global financial landscape, labeling U.S. stocks as "one of the weakest" he has ever witnessed and forecasting significant trouble ahead for the private credit industry. Speaking with Bloomberg's Odd Lots podcast and other media, , suggesting they keep 20% of their portfolios in cash and warning against the speculative excitement surrounding artificial intelligence and data center sectors.

Gundlach's criticism is not limited to the stock market. He compared the explosive expansion of the $1.7 trillion private credit sector to the subprime mortgage bubble of 2006,

due to what he called "low-quality loans" and a decline in lending standards. The recent collapses of companies such as auto lender Tricolor and car parts maker First Brands Group have heightened his worries, about systemic vulnerabilities in the sector.

Despite his pessimistic view, Gundlach hasn't dismissed all investment options. He continues to regard gold as a "genuine asset class," but

from a previous 25%, citing reduced potential gains. Gold has climbed 54% this year, but Gundlach observes that its recent stabilization means investors should see it more as a safeguard than a speculative bet. This marks a shift from his earlier forecast of gold reaching $10,000 per ounce, though in the face of a weakening dollar and rising inflation.

Gundlach Cautions That Inflated Markets and Unstable Loans Could Trigger a Financial Crisis image 0
Gundlach has also criticized the conventional 60/40 investment strategy, advocating for a significant shift in asset allocation. He recommends limiting stock holdings to 40%, with an emphasis on international equities, and , with a preference for fixed-income assets outside the U.S. "The condition of the U.S. stock market is among the worst I've seen in my career," he remarked, and speculative surges in sectors driven by AI.

His skepticism toward AI mirrors past episodes of market euphoria, like the dot-com boom. "Markets tend to overreact and overprice major changes," Gundlach observed,

in a sharp correction. NYU professor Aswath Damodaran has supported this perspective, recently suggesting that even unconventional assets such as baseball cards might offer superior risk-adjusted returns in the current climate.

The bond king's remarks come as market volatility increases. The S&P 500 has dropped 1.45% over the last month, and

about excessive investments in AI and other high-growth industries. Gundlach's advice—boosting cash reserves, trimming exposure to speculative sectors, and favoring tangible assets—reflects his conviction that investors should brace for a potentially severe market downturn.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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