Elite investor Jeffrey Gundlach compares AI stock boom to dot-com bubble and warns of economic pain

Jeffrey Gundlach, CEO of DoubleLine Capital.CNBC/Getty Images

  • Jeffrey Gundlach compares the AI-fueled stock market boom to the dot-com bubble.

  • The billionaire CEO of DoubleLine Capital predicts sticky inflation and recession.

  • Two other market gurus, Bill Gross and John Hersman, warned this week about overvalued stocks.

Jeffrey Gundlach warns Artificial Intelligence’s Crazy Stock Market reminded him dotcom bubble — and predicts a painful combination of stubborn inflation and recession ahead.

“This feels a lot like 1999,” the CEO of DoubleLine Capital said in an interview. X space conversation this week.

The billionaire investor noted that the Nasdaq soared 80% in the fourth quarter of 1999, only to fall 85% from its peak 12 months later.

Gundlach described the current market as “greedy” and momentum-driven and said he would only invest in equal-weighted indexes because he was “not interested in owning seven stocks.”

The fund manager refers to the so-called Hao QiA group that includes Nvidia and Microsoft has grown so big that it makes up a large portion of market-cap-weighted indexes like the S&P 500 and Nasdaq 100.

Gundlach acknowledged that member companies like Meta are highly profitable, unlike their Internet predecessors. But he repeated the old adage: the faster and higher something rises, “the harder it falls.”

Gundlach said: “Now is not the time to take new, aggressive stances in any risky areas. There are a lot of risks in the market right now.”

In addition to artificial intelligence, the prospect of interest rate cuts this year has also sent stocks soaring. Lower interest rates tend to increase a company’s sales by encouraging customers to spend rather than save, and often improve company profits by lowering interest costs.

Gundlach warned that recent increases in crude oil prices could accelerate inflation. He also warned that if economic growth slows, the Fed may cut interest rates too low and shrink its balance sheet significantly, causing prices to surge again.

“We’re going to have inflation economic slowdown,” he said, citing the risk of a “stagflation-type environment.”

booms and bubbles

Bill Gross, another billionaire bond investor, echoed Gundlach’s concerns that stocks are overly nervous. Appearance Published on Friday.

The PIMCO co-founder questioned why the market is still trading at historically high levels when interest rates have jumped from almost zero to over 5% over the past two years. This makes risky assets such as stocks less attractive by increasing the guaranteed returns on Treasury bonds and savings accounts.

“Fiscal deficit spending and enthusiasm for artificial intelligence have been overwhelming factors and drivers, with ‘irrational’ exuberance dominating the market since 2022,” Gross said.

John Hussman, president of Hussman Investment Trust, goes one step further research notes on Friday.

The longtime market bear warned that stocks have only seen such extreme valuations twice before: once in January 2022, the day before the market peaked, and again in 1929, before the Wall Street Crash and Great Depression. At the peak of the bubble.

“My impression is that investors are currently enjoying a double top from the most extreme speculative bubble in U.S. financial history,” Hersman said.

Read the original article business insider

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