Jeffrey Gundlach, chief investment officer of DoubleLine Capital and often reffered as the Bond King, has advised investors to stash in cash, gold, and other “real assets” in 2026, as Business Insider reported.
Speaking to Bloomberg, Jeffrey Gundlach warned that stocks and other risky assets could face pressure if the US Federal Reserve raises interest rates instead of cutting them. He had earlier predicted that there could be wo to three Fed rate cuts in 2026, but that seems unlikely.
“If you’re buying risk assets on the back of only two rate cuts — is your high conviction idea — you’re back on the wrong horse. We’re not going to get rate cuts this year,” Gundlach said, as reported by Business insider.
Hopes of Fed rate cuts helped markets rally over the past year. But the Iran war pushed oil prices higher, raising fears of fresh inflation and reducing expectations of lower rates.
Moreover, stocks also look expensive and the major indexes have climbed to new records in recent weeks, despite the US and Iran having yet to ink an official peace deal, he opined.
As per Gundlach, here’s how your portfolio should look now:
Jeffrey Gundlach recommends keeping 20% of a portfolio in cash, unchanged from his earlier advice last year.
He also suggests allocating 20% to hard assets such as commodities, up from his earlier 10%-15% recommendation.
If gold dips below $3,500 an ounce, Gundlach said he would be buying it “with both hands.” While Gundlach did not suggest a fixed allocation to gold, he has previously said that keeping up to 25% of a portfolio in bullion would not be “excessive.”
Gundlach take on US debt restructuring
Gundlach is repositioning some of his funds for the extreme scenario that the US government could choose to restructure its debt in response to a potential future recession.
Gundlach told Bloomberg, while unlikely, the US may at some point opt to swap out bondholders’ higher-coupon Treasuries and replace them with ones with lower interest payments across the maturity curve.
To get ahead of such a move, Gundlach has replaced higher-coupon Treasuries in some portfolios — including its flagship — with the lowest-coupon ones of the same maturity.
His worry is the US government, in a bid to reduce its interest payments during a severe slowdown, might decide to lower the coupons unilaterally on all outstanding debt. He gave the example of it potentially reducing coupons to 1% from 4%, without changing the maturity of the debt, something he called “the ultimate way of kicking the can down the road.”
(With inputs from Bloomberg)