Jeffrey Gundlach sees one of the 'least healthy' stock markets of his career, urges 20% cash

Core Viewpoint - Jeffrey Gundlach, CEO of DoubleLine Capital, warns that many assets are overpriced and suggests investors maintain 20% of their portfolios in cash to guard against a potential downturn [1][2]. Market Conditions - Gundlach describes the current stock market as dangerously speculative, indicating it is among the least healthy he has observed in his career [2]. - He highlights speculative excess in AI-related stocks and data-center investments, cautioning that momentum investing during a boom can lead to negative outcomes [2]. Private Credit Concerns - Gundlach expresses significant concern over the rapid growth of the private credit market, valued at $1.7 trillion, which lends directly to companies [3]. - He compares the current situation in private credit to the subprime mortgage crisis, noting that lenders are making "garbage loans" [3][4]. - Recent failures in the sector, such as auto lender Tricolor and car parts supplier First Brands Group, are seen as early warning signs of potential issues [3]. Risks of Retail Investment in Private Credit - Gundlach criticizes the trend of selling private credit funds to retail investors, labeling it a "perfect mismatch" due to the promise of easy withdrawals despite the illiquid nature of these assets [4]. - He warns that if investors withdraw funds, it may force these funds to sell at significant losses [4]. Investment Strategy - Despite his warnings, Gundlach acknowledges the difficulty in profiting directly from this perspective, stating he will not short junk bonds due to ongoing losses [5]. - He maintains a positive view on gold but has reduced his recommended allocation from 25% to 15%, citing persistent inflation concerns driven by tariffs on import prices [5].