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Gundlach & Gidumal: Stock Market Heading for a Crash

Dec 07, 2019 | Kevin Troy |

Gundlach & Gidumal: Stock Market Heading for a Crash

A growing line of leading hedge funds and Wall Street figures are warning that we could see a stock market collapse in 2020.

Whereas investors in 2019 could invest in pretty much any stock and gain 15–20%, things could all change next year, according to DoubleLine’s Jeffrey Gundlach in an interview with Yahoo Finance. Grundlach, who has three times been named to Bloomberg’s Markets magazine’s “50 Most Influential,” added that a recession is fast approaching.

What he called the “chart of the year” shows an alarming top forming in US stocks, similar to Japan’s Nikkei 225 in the early 1990s, the Euro Stoxx 50 in the late 1990s, and MSCI Emerging Markets in 2007–2008.

A graph showing equity market tops in the US, Europe, Japan, and emerging markets.

“[W]hen the next recession comes, the United States will get crushed, and it will not make it back to the highs that we’ve seen, that we’re floating around right now,” Grundlach said.

He explained that the corporate bond market in the United States is rated higher than it should be, “in the same manner that securitized mortgages were rated way too high before the global financial crisis,” he added, urging everyone to closely watch corporate because it could be big trouble in the next recession.

Steven Gidumal, managing partner of Virtus Capital, said the fate of this historical bull market depends on what happens in next year’s presidential election. According to CNBC, Gidumal said the sell-off could be as high as 50%. Leading up to election, the hedge fund manager said, investors are in for a bumpy market with a recession looming in the first quarter of 2021.

A downturn in the economy may already have begun—significant cracks in the junk bond space are beginning to appear. In October, the broader junk bond market showed negative returns, while the stock market soared.

Graphs showing S&P 500 and HYG.

Gundlach is predicting that the next big move for the dollar is lower. He warns that when the next recession hits, the US dollar and US stocks will be in serious trouble, recommending investors to diversify.

The predictions from the two heavy-weights come after another prominent Wall Street figure, Ray Dalio, placed a $1 billion bet that the stock market will crash before March.

Is your portfolio ready for the upcoming recession? If you want to learn how you can protect your investments with gold, schedule a free consultation with me, and I’ll walk you through the benefits and how you can invest in precious metals.

About Kevin Troy

Kevin Troy

Kevin has spent over 16 years in the financial industry, focused primarily on precious metals as investment assets. He has published many articles on buying and selling precious metals along with the best entry and exit strategies for various financial assets. He has helped thousands of clients protect, preserve, and safeguard their investments with precious metals and has been with Gold Alliance for more than two years as a leading Sr. Portfolio Manager, overseeing a large portion of our clients’ portfolios.