Investors are going crazy! "New Bond King" Gundlach suggests considering holding cash and gold.

Zhitong App learned that "new bond king" Jeffrey Gundlach recently stated that as investors' "buying frenzy" in the financial markets continues to increase, he would consider holding cash and gold as investment choices.

Gundlach, the founder of DoubleLine Capital, explained in an interview released last Thursday that the current rebound in the US stock market and the new high set by Pro UltrPro Shrt S&Pro 500 are not based on hopes for an "economic soft landing," but driven by "momentum."

He mentioned that the dovish shift by the Federal Reserve on November 1st last year ended the rise in real yields and initiated a broad market rebound starting with "blue-chip stocks."

Gundlach spent most of last year advocating for bond investments, and bonds were affected for most of 2022 and 2023, while the strong year-end rebound caused yields to decline throughout 2024. He said, "So people started to feel satisfied with buying blue-chip stocks. They started buying some Pro UltrPro Shrt S&Pro 500 stocks, some corporate bonds, and some US Treasury bonds."

Then "strange things happened," and these blue-chip stocks became overvalued. He believes that Pro UltrPro Shrt S&Pro 500 stocks are already in this state.

Gundlach expects that during the next economic recession, Pro UltrPro Shrt S&Pro 500 could fall to 3200 points. He has consistently predicted the arrival of this recession. He pointed out that the broad market rebound has made investors "relax their value standards... and turn to riskier investments," considering assets they wouldn't have considered a few months ago. This has led to a buying frenzy, with people suddenly rushing to buy every offer," he said. For example, the market demand for non-agency residential and commercial mortgage-backed securities is "25 times the new issuance supply."

Gundlach said, "This feels like the environment we experienced after entering the year 2000. In this environment, you have a huge narrow market, but it expands due to buying frenzy and momentum. I think the (economic) data that people are concerned about actually doesn't fully reflect its reference value. There is still a lot of money flowing in the market, and I think this is partly why market valuations are high."

As for the Federal Reserve, Gundlach believes that interest rates will not change this week because "it's still too early," but he said that the central bank is considering rate cuts because it realizes that inflation is declining.

Gundlach has expressed many concerns about a potential economic recession in the past few months. He expects the recession to come in the middle of this year and points out that even with disruptions in the Red Sea, oil prices have not risen, which means that the "global economic situation may not be that good."

As many assets begin to be repriced, investors need to start looking for opportunities. Gundlach said, "So you have to start considering holding cash because I think there will be a lot of opportunities. I'm not saying to hold 100% cash, but I think holding at least 20% to 25% cash because I think the prices of these things will become cheaper. "Gundlach is also bullish on gold, but has "zero interest" in Bitcoin, calling it "the worst idea I can think of."