Sep 25, 2026 · 43 min
Debt supply tests markets as Gundlach warns of volatility
Back-to-School on the Markets with Jeffrey Gundlach (DoubleLine) & Solita Marcelli (UBS)
The discussion connects fiscal deficits, inflation, central-bank policy and AI valuations to portfolio risks across major asset classes.
- 1Rising government bond supply and persistent inflation are reshaping the outlook for rates, especially at the long end.
- 2Gundlach favors valuation-aware diversification across bonds, equities, real assets, cash, gold and emerging-market debt.
- 3A future recession, dollar weakness or fading AI enthusiasm could expose concentrated positions and amplify market volatility.
Don't miss
Gundlach warns that AI enthusiasm may have passed its peak, potentially setting up a sharp reversal in employment, valuations and investor sentiment.
The brief
Solita Marcelli introduces Jeffrey Gundlach for a wide-ranging discussion of rates, inflation, Federal Reserve policy and global markets as government borrowing reshapes the backdrop.
Gundlach argues that enormous government-bond supply is helping push rates higher across developed markets, including Japan, while fiscal deficits complicate the inflation and policy outlook.
His portfolio framework spans equities, traditional fixed income, securitized credit, real assets and cash, with valuation determining where opportunity outweighs concentration risk.
The conversation turns to a potentially weaker dollar during a future recession, alongside gold and local-currency emerging-market debt as fiscal confidence deteriorates.
Gundlach’s sharpest warning is that AI enthusiasm may have peaked, leaving employment, valuations and investor sentiment vulnerable to a forceful reversal.
What was said on this episode
22 statements · 7 positive · 14 negative · 1 neutral
Government bond supply is driving global interest rates higher.
“One of the things that's really driving all of this is just the supply of bonds.”
Listen at 2:02
AI-related high-yield bonds have widened 150 basis points.
“the AI bonds are out by 150 basis points as of last week.”
Listen at 4:34
The S&P 500 had a CAPE ratio of 42 as of July 31.
“The S&P 500, as of July 31st, the most recent number I have, had a CAPE ratio of 42%”
Listen at 7:29
Historically, S&P 500 ten-year real returns were negative after CAPE exceeded 35.
“if you're above 35 on the CAPE ratio, you basically have never had a forward real rate of return from the S&P 500 that's positive. It's negative all the time.”
Listen at 8:00
A 42 CAPE and 2% inflation imply negative 4% annual S&P returns for ten years.
“we're talking about a negative 4% return per annum for 10 years”
Listen at 8:54
Interest rates are more likely to rise than fall.
“the path of least resistance appears to be up”
Listen at 10:25
Oil prices will not fall to $50 or $60.
“I don't think it's going to drop down to 50 or 60.”
Listen at 11:50
Oil prices may bottom around $70 because governments refill reserves.
“I would say probably it's 70.”
Listen at 12:00
A return to 2% inflation lacks a convincing basis.
“I don't see the real case for this 2%.”
Listen at 12:26
The Federal Reserve will not cut rates in 2026.
“there will be no rate cuts in 2026.”
Listen at 13:23
The Federal Reserve will probably raise rates twice more.
“So the Fed's probably going to raise rates a couple more times”
Listen at 13:51
The ten-year Treasury yield could reach 6%.
“it seems like 6% is not unreasonable to think about for the U.S. tenure.”
Listen at 14:52
Gundlach would buy long-term Treasuries only near 6%–6.5% yields.
“I would not be a buyer of long-term treasuries unless the yield were about 6%, maybe even 6.5 on the 30-year treasury.”
Listen at 15:35
Gundlach eliminated market-cap-weighted equity exposure.
“I really went to nothing in market cap weighted concept.”
Listen at 17:40
Gundlach recommends allocating 30% to stocks.
“the stocks that I recommend, I only recommend 30% stocks.”
Listen at 17:47
Gundlach recommends an equal-weighted equity index allocation.
“I recommend only one allocation, and that's to an equal weighted index.”
Listen at 17:51
Older non-guaranteed mortgage-backed securities can yield about 6.25%–6.30%.
“you can get up around 6.25, 6.30 in what I think is a risk-free asset.”
Listen at 19:15
AAA CLOs are unlikely to incur losses.
“I really don't think AAA CLOs are going to take any losses.”
Listen at 19:50
A dollar decline would benefit local-currency emerging-market bonds.
“should the dollar decline, which is my base case of over the intermediate to long term, you're going to get a currency benefit”
Listen at 20:39
Gundlach recommends allocating 10% to a commodity fund.
“I think 10% should just be in a commodity fund.”
Listen at 21:25
Gundlach increased his gold allocation from 5% to 10%.
“I've increased my gold holding to 10% from 5%.”
Listen at 21:33
Long-term interest rates are more likely to rise than fall.
“I'm still on the side that long rates are half of least resistance is up”
Listen at 27:24
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.