Gundlach Warns Dollar is ‘Doomed,’ Stocks Are at ‘Nosebleed’ Levels

The comments below are an edited and abridged synopsis of an article by Tyler Durden

During a recent CNBC interview, Jeffrey Gundlach warned that the only way stocks can sustain their record highs would be for the Fed’s unprecedented stimulus programs to remain in place forever.

Gundlach Warns Dollar is ‘Doomed,’ Stocks Are at ‘Nosebleed’ Levels | BullionBuzz | Nick's Top Six
Concept photo of a troubling economy and finances. Paper boat made of 100 dollar bills at the mercy of waves.

This isn’t the first time Gundlach has warned about an impending blow-up in stocks. In March, he said that suggesting the stock market was anything other than very overvalued versus history is ignorant of all the metrics of valuation.

While Gundlach doesn’t see much upside for commodities, he believes rising wages will continue to drive the price of goods higher. And although the Fed’s asset-buying and a general wash of liquidity have kept bond yields ridiculously low, the stock market has been trading at extremely high valuations.

Equity valuations might be outrageous, Gundlach said. But while stocks are enjoying outrageous valuations based on most metrics, when compared to bonds, stocks actually look cheap.

The biggest threat to markets, as Gundlach sees it, is persistently accelerating inflation. He argued that even two more months of higher-than-anticipated inflation could force a reality check at the Fed.

In the past, Gundlach has warned about the dangers of a corporate debt implosion, and last week he warned that corporate bonds are also at their most expensive level in 20 years.

Finally, asked for his view on cryptocurrency, Gundlach said crypto was a proxy for speculative fervor, and that the chart looks pretty scary.

To sum up: Gundlach said stocks are overvalued (except vs bonds), corporate bonds are the most expensive in 20 years, commodity prices have peaked yet inflation is accelerating, Bitcoin is a highly speculative asset to be avoided, and the Fed is cornered.

In other words, get ready for a wild ride in markets over the next year as the Fed is forced to start hiking interest rates and dialing back its balance sheet.

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