DoubleLine CEO Jeffrey Gundlach issued a cautionary warning on Tuesday, stating that stock market valuations are reminiscent of the beginning of the last bear market. Gundlach advised investors to consider holding a significant portion of their portfolio in cash.
Gundlach noted that traditional valuation measures such as price-to-earnings (P/E) and price-to-book ratios indicate that stocks are currently overvalued, similar to two years ago. However, he highlighted that bond yields have significantly increased by 500 basis points at the short end and 400 basis points at other parts of the yield curve, presenting a different valuation metric.
The previous bull market for stocks reached its peak approximately two years ago, with the S&P 500 hitting a record high on Jan. 3, 2022. Subsequently, the index experienced a 25% decline to its low point in October of that year, followed by a rally in 2023. The S&P 500 recently reached a new record high last month.
Source (CNBC)
