"New Bond King" Gundlach warns US stock valuations are too high: recommends increasing cash and physical asset allocations, gold pullbacks still buying opportunities

According to Zhitong Finance, DoubleLine Capital Chief Investment Officer Jeffrey Gundlach, known as the "New Bond King," recently stated in a Bloomberginterview that current financial market valuations are at high levels, and investors should not overexpose themselves to risk assets. He believes that the market rally was previously driven by expectations of Federal Reserve rate cuts, but with persistent inflation pressures and an uncertain interest rate outlook, this rationale is now being challenged.

Gundlach noted that at the beginning of the year, the market expected the Federal Reserve might cut rates two to three times in 2024, but this expectation has now clearly weakened. He candidly pointed out that if the core reason behind investors buying risk assets is merely “two rate cuts this year,” they might be heading in the wrong direction. He believes the Federal Reserve may not necessarily cut rates in 2026, and cannot even rule out the risk of rate hikes. Affected by the Middle East situation, rising oil prices, and persistent inflation, market confidence in rate cuts has already declined.

In terms of asset allocation, Gundlach advises investors to increase the defensiveness of their portfolios. His latest portfolio recommendations include holding 20% in cash and allocating 20% to physical assets, such as commodities. He explained that a substantial cash position helps investors remain flexible amid market volatility, while physical assets can offer some protection in an inflationary environment and during the decline of the dollar’s purchasing power. It is reported that Gundlach’s recommended allocation to physical assets is higher than the 10% to 15% he proposed last year.

Gold remains one of Gundlach’s top picks. He stated that if gold prices fall below $3,500 per ounce, he would "buy heavily." According to market reports, he considers the $4,100 to $4,200 range as an initial entry target. Business Insider reports indicate that Gundlach did not specify an exact allocation for gold, but he previously mentioned that an allocation of up to 25% in gold would not be "excessive."

Gundlach’s cautious stance contrasts with the recent record highs in major US stock indexes. Despite the continued inflows into tech stocks and AI-related assets, he believes that stock valuations are already “extremely, extremely high” given that the risk of rising interest rates has not been eliminated. He warned that if inflation heats up again or the Federal Reserve shifts to a more hawkish stance, current highly valued assets may face repricing pressure.

From a market perspective, recent US economic data still show resilience, but inflation, energy costs, and geopolitical tensions continue to influence policy expectations. Gundlach’s recommendations reflect that some macro investors are shifting from “chasing risk assets” to “preserving liquidity and increasing exposure to anti-inflation assets.” For regular investors, his views do not simply indicate a bearish outlook, but emphasize that, at current high valuation levels, building portfolio defensiveness through cash, commodities, and gold is advisable.