Jeffrey Gundlach, CEO of Double Line Capital and the "new bond king", recently warned that the crazy stock market under the wave of artificial intelligence (AI) reminded him of the Internet foam and predicted that there would be stubborn inflation and economic recession in the future.
He pointed out in the latest interview, "This feels very much like 1999. The Nasdaq index surged 80% in the fourth quarter of 1999, but fell 85% from its peak 12 months later."
Gunlak stated that the current market is driven by "greed" and stated that he will only invest in an equally weighted index, and he is "not interested in owning the" Technology Seven ".
The "tech giants", including Nvidia and Microsoft, are increasingly expanding and occupy a considerable proportion in the S&P 500 and NASDAQ 100 indices.
Gunlak emphasized an ancient saying: the faster and higher something rises, the heavier it falls.
"Now is not the time to take a new radical stance on anything at risk. There are many risks in the market that have already reached this point," he said.
In addition to artificial intelligence, the prospect of interest rate cuts this year has also boosted the stock market. Lower interest rates often boost business sales by encouraging consumers to consume rather than save, and often increase profits by lowering interest costs.
Gunlak also warned that the recent rise in crude oil prices may accelerate inflation. He also warned that if economic growth slows down, the Federal Reserve may cut interest rates excessively and shrink its balance sheet excessively, leading to another surge in prices.
"We will face an inflationary slowdown," he said, pointing out the risk of a "stagflation environment.".
Frequent warnings on Wall Street
Coincidentally. Bill Gross, the former chief investment officer of the US bond giant Pacific Investment Management Corporation (PIMCO) and a famous investor known as the "old king of bonds", also echoed Gunrak's concern about the excessive expansion of the stock market in his outlook report released last Friday.
He questioned why the market is still at record high levels despite interest rates jumping from almost zero to over 5% in the past two years. In theory, this should increase the return on US treasury bond bonds and savings accounts, thus reducing the attractiveness of risky assets such as stocks.
"Fiscal deficit spending and enthusiasm for artificial intelligence have always been the overwhelming factors and driving forces, and since 2022, the 'irrational' prosperity has dominated the market," he said.
In addition, John Hussman, a well-known American fund manager, also warned that there were only two times when the stock market valuation was so high: one was the day before the market peaked in January 2022, and the other was when the foam peaked before the Wall Street crash and the Great Depression in 1929.
"My impression is that investors are enjoying the double tops of the most extreme speculative foam in American financial history," he said.