Bond Market at Risk of ‘Reckoning’ Has Jeff Gundlach Selling America

Elite investor Jeffrey Gundlach is doubling down on the ‘”Sell America” trade.

The DoubleLine Capital CEO, previously coined as the “King of Bonds,” raised concerns about dollar-denominated assets when speaking at the Bloomberg Global Credit Forum on Wednesday.

At the core of his comments is growing concern over America’s swelling debt load, which is expected to get even bigger if President Donald Trump’s “Big Beautiful Bill” eventually passes.

“There’s an awareness now that the long-term Treasury bond is not a legitimate flight-to-quality asset,” Gundlach said, warning that a “reckoning is coming.”

He’s referring to recent volatility in long-dated government bonds, like 30-year Treasurys, which haven’t been trading like the sure-thing safe bet they’re supposed to be.

And Gundlach’s firm has been putting its money where its mouth is. The DoubleLine CEO said his firm has been allocating more fund holdings to foreign currencies, and recommended that investors broadly start to think about boosting non-dollar-denominated holdings.

Gundlach also sees the tide turning in the global stock market.

“Things always take longer than people think, but it’s happening in real-time, and the next one will be selective emerging market equities as opposed to the US,” Gundlach said.

2 signs of stress

Gundlach highlighted multiple unusual patterns that have been flashing in US markets this year. He sees these as signs that markets are likely concerned about the US debt, and that faith in US assets is starting to fade, he added.

1. The US dollar and stocks. When the S&P 500 falls, the value of the dollar typically moves higher relative to other currencies, Gundlach said.

   But in April, when the S&P 500 tanked 20% amid the turmoil from Donald Trump’s tariffs, the US dollar also weakened in value. The US Dollar Index, which weighs the greenback against a basket of foreign currencies, traded around 97.8 on Thursday, down 9% from levels at the start of the year.

2. US Treasurys. When the Fed cuts interest rates, the 10-year US Treasury yield, which is tied to long-term interest rate expectations in the economy, typically falls.

   But the 10-year yield has climbed around 74 basis points from its low in September, around the time the Fed issued its first rate cut.

“So I think what we have is recognition is that the interest expense for the United States is untenable if we continue running a $2.1 trillion budget deficit and we continue to have sticky interest rates,” Gundlach said of the market shifts.

Foreign investors have steadily added exposure to the US market over the last 17 years, Gundlach said, noting that the foreign net investment position in the US currently hovered around $25 trillion.

“It’s not inconceivable that some of the $25 trillion that came in just a couple — not even two decades — could go out,” Gundlach said. “You should be thinking about increasing your allocations to non-dollar investments. And it’s already working.”

Where to go if you’re “selling America”

Gundlach said there were several areas where investors could find safety away from US assets.

1. Gold. Gundlach said he’s continued to hold gold when it reached the level around $3,000 an ounce, and that he also holds stakes in gold miners. Previously, he’s said that he believes gold could rally to as high as $4,000 an ounce as concerns swirl over tariffs, geopolitical conflict, and rising debt levels in the US.

   “I think gold is a real asset class. It’s no longer for lunatic survivalists and wild speculators,” he said.

2. India. Gundlach also said investors should look into Indian assets, suggesting that India could see a similar run-up in economic growth that China has seen over the past three decades.

   India is riddled with many of the same economic issue China faced 35 years ago, Gundlach said, though be believed many of those issues can be fixed.

   “I don’t know how long it will take, but that’s one you buy,” he said.

Gundlach has consistently sounded the alarm on rising deficits in the US for years, and encouraged investors to pile into safe-havens.

But forecasters on Wall Street have cast doubt on the “Sell America” trade, which is hinges on the idea that US will stop outperforming other assets in the world. JPMorgan and Morgan Stanley are among those who have said that they believe US assets will continue to dominate global markets.