“Jeffrey Gundlach, one of the world’s leading bond fund managers, on Friday warned that the rallying U.S. stock and corporate debt markets are highly vulnerable to a major reversal.
The investor, who was crowned by Barron’s as the new “King of Bonds” a year ago, said in an interview that he thinks the recent rally in stocks, which last week drove the Dow Jones industrial average above 13,000 points for the first time since May 2008, has gone too far.
Gundlach, the chief executive officer and chief investment officer of the $28 billion DoubleLine Capital LP, said he is still concerned about the euro zone crisis and deepening tensions in the Middle East.
The United Nations’ nuclear agency said on Friday that Iran has sharply stepped up its uranium enrichment drive in a report that will further inflame Israeli and Western fears that Tehran is pushing ahead with an atomic weapons program.
“It’s an awfully easy decision right now to not be making further investments in risk assets,” Gundlach said.
“The pricing of the market has returned to the levels prior to the scales falling from investors’ eyes regarding the global financial crisis, and I really don’t think that’s appropriate,” he said.
The Dow has gained 8 percent since December and the broader S&P 500 index is up roughly 10 percent.
The size of the gain leaves no cushion of safety given all the dangers in the world economy and leaves the stock market as priced for disaster as it was when the financial crisis hit in 2008, Gundlach argued.
“When I look at the pricing in the market today, I see a good chance of downside movement of some significance,” he said….”
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