Gundlach Warns Traders to Beware of ‘Mania Sentiment' in Markets

Jeff Gundlach is warning investors not to misjudge the “dangerous cocktail” of rising interest rates and a weakening dollar.

In a tweet on Monday, the chief investment officer at Los Angeles-based DoubleLine Capital LP said he saw “mania sentiment everywhere” and advised traders to “risk manage mindfully.”

The billionaire bond guru is part of a growing chorus of market players warning that a decade of central bank stimulus has pushed asset prices to unsustainable levels. Goldman Sachs Group Inc. warned this month that global stocks and U.S. Treasuries are in the throes of the most “extreme” start to the year ever as bullish sentiment engulfs markets.

Earlier this month Gundlach forecast a negative annual return for the S&P 500 index which has rallied to new record highs in January. He has also warned investors against cryptocurrencies and short-term plays in emerging markets.

Gundlach has forecast commodities may be one of the best investments this year as they surge during the late phase of the economic cycle. The Bloomberg Commodity Index has gained 2.5 percent in 2018.

Central-bank asset purchases may have been “a driving factor of rising stock market valuations in recent years” in the U.S. and U.K., according to a December study for the Bank for International Settlements. At the same time, the massive stimulus hasn’t returned growth to pre-recession rates in either economy, it noted.

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