Jeffrey Gundlach isn't mincing words. The DoubleLine Capital CEO told listeners on a Bloomberg Odd Lots podcast Monday that the U.S. equity market looks "among the least healthy" he's encountered in his entire career. And when someone called the "Bond King" starts sounding alarm bells, people tend to listen.
The problem, according to Gundlach, is that valuations have gone bonkers. Price-to-earnings ratios and market capitalization metrics are "off the charts," he said, describing the market as "incredibly speculative." The AI frenzy reminds him of past manias that didn't end well—think electricity stocks that soared in the early 20th century, peaked, and never came back.
Momentum investing during these mania periods can be dangerous, Gundlach warned. Speculative markets have a habit of reaching "insanely high levels" before reality sets in.
Why Gold Is Getting All the Love
So what's an investor to do when financial assets look stretched? Gundlach has been betting on gold, which he calls his "number one best idea for this year." He emphasized that gold has evolved into a recognized "real asset class" and pointed to its impressive performance over the past year.
Central banks have been buying gold aggressively, helping fuel the rally. Some analysts think it could hit $5,000 per ounce by 2026. Gundlach recommends investors hold about 15% of their portfolios in gold—down from his earlier suggestion of 25%, but still substantial.
Not everyone agrees, though. Legendary investor Bill Gross said in October that gold's rally looks overextended, calling it a "momentum/meme asset" in a post on X.
Rethinking the Traditional Portfolio
Gundlach isn't just tweaking around the edges. He's advocating for a major portfolio overhaul: keep fixed income at 25% and stocks at 40%, but put the rest into real assets like gold and cash. It's a reflection of just how elevated he thinks market valuations have become.
