Jeffrey Gundlach, CEO of DoubleLine Capital LP, recently expressed serious concerns about the current state of the financial markets. During an interview at the New York Stock Exchange on May 7, 2025, Gundlach highlighted the issue of overpriced assets and urged investors to keep around 20% of their portfolios in cash as a precaution against a potential market downturn.
In a conversation on Bloomberg's Odd Lots podcast, Gundlach described the stock market as perilously speculative. He remarked that it appears less stable than at any other time in his career, which began in the mid-1980s at TCW Group. Specifically, he noted excessive speculation in AI-related stocks and data-center investments, warning that momentum-based investing during such booms can have adverse outcomes.
Gundlach expressed particular concern over the rapid expansion of the private credit market, valued at $1.7 trillion, where companies are being directly financed. He drew parallels to the pre-2008 mortgage crisis, citing problematic loans from firms like auto lender Tricolor and car parts supplier First Brands Group as early indicators of trouble.
He asserted, "The next big crisis in the financial markets is going to be private credit," likening it to the subprime mortgage issues of 2006. Gundlach criticized the strategy of marketing private credit funds to retail investors, labeling it a "perfect mismatch" given the promise of easy withdrawal in a market where assets are not easily liquidated. The risk, he noted, is that investors could trigger forced sales at significant losses.
Despite these warnings, Gundlach admitted the difficulty in capitalizing directly on his perspective, as he refrains from shorting junk bonds due to consistent losses in that trade.
On a positive note, Gundlach still endorses gold as a viable investment, although he has adjusted his suggested allocation from 25% to 15%, initially recommended in mid-September. This adjustment reflects shifts in inflation expectations following the influence of tariffs on import prices.