Last Updated: Oct. 12, 2020 at 10:08 a.m. ETFirst Published: Oct. 11, 2020 at 10:13 p.m. ETBy
‘The trade is to wait for that trade’
‘Within 18 months, it’s going to crack pretty hard. I think that you want to be avoiding it for the time being. When the next big meltdown happens, I think the U.S. is going to be the worst performing market, actually, and that’ll have a lot to do with the dollar weakening.’
That’s DoubleLine Capital billionaire Jeffrey Gundlach, who has been hailed as “The Bond King,” sharing his bearish thoughts on the stock market in a recent Real Vision interview.
“I actually think owning 25% gold GOLD, -0.57% isn’t crazy right now. Nor do I think owning 25% cash DXY, +0.03% is crazy,” he said, noting that the two risk-averse positions make up half of the “permanent portfolio” concept, alongside 25% in stocks and 25% in bonds.
“That’s a good investment right now,” Gundlach said. “I think we have such a potential tail risk of outcomes, such a dispersed potential outcomes, that you really need to have this barbelled asset allocation concept.” Read more about the Permanent Portfolio.
He went on to paint a bleak picture for the economy, even as many Wall Street pros call for a V-shaped recovery in the U.S. “I don’t think people fully understand how many business closures there’s going to be in the next few months,” he said, adding that he’s shocked at how many empty storefronts are popping up. “There’s going to be a lot more of that. I think it’s going to really accelerate. I think there’s going to be real problems in the wintertime here.”
Gundlach told Real Vision the next “very rare” opportunity to make a killing in equities is coming within a couple of years. The trick is to be ready when the bargains are there for the taking.
“The trade is to wait for that trade,” he said. “It will be quite a pleasant experience to not be in the car on the first wheel of the roller coaster that’s coming. I just want to be very low risk right now.”
No sign of that crack in Monday’s trading session, as the Dow Jones Industrial Average DJIA, +0.60%, S&P 500 SPX, +0.99% and tech-heavy Nasdaq-100 COMP, 1.55% were all in rally mode to start the week.