Veteran Investor Warns: Stocks Overvalued, Portfolios Should Cap at 40%

As of November 18th, 2025, veteran bond investor Jeff Gundlach has sounded the alarm on the state of today's financial markets. Gundlach observes that almost all asset classes appear overvalued, and he is advising investors to limit their exposure to stocks to a maximum of 40% of their portfolios.

Gundlach's concerns are echoed by other market watchers, who see troubling signs in the current market landscape. The "potency of the AI narrative" is driving valuations that some analysts compare to the dotcom bubble of the late 1990s. Meanwhile, the VIX, Wall Street's "fear index," has crept higher, and CNN's "Extreme Fear" indicator points to growing unease among investors.

Some investors have already started to reduce their equity exposure, with a recent Deutsche Bank report showing discretionary investors moving to the bottom of their positioning range. Even Saudi Arabia's sovereign wealth fund cut its positions in U.S. stocks during the third quarter of 2025.

Gundlach's advice to investors is to steer clear of the traditional 60/40 portfolio allocation, which he believes is no longer appropriate for the current market conditions. Instead, he recommends a more diversified approach, with no more than 40% in equities, 25% in bonds, 15% in gold, and the remainder in cash.