Gundlach: Stocks or Bonds? The Choice Right Now Is Clear

The fixed income market is “very cheap” now compared to the stock market, offering solid returns and upside potential with limited downside risk, Jeffrey Gundlach said Wednesday.

“I think this is the time you want to have a barbell portfolio with some risk assets, primarily in bonds,” the CEO of DoubleLine Capital, a bond-focused investment firm, said on CNBC’s “Closing Bell.”

While Gundlach previously suggested a portfolio comprising 30% stocks, 60% bonds and 10% real assets — such as gold — he now recommends an allocation of 20% stocks, 60% bonds and 20% real assets, he said.

Investors can reach 5% returns in a “very high-grade bond portfolio” with no default risk, and 8% to 10% in a “well-positioned, actively managed fixed income portfolio” that takes the “middle part of the capital structure,” Gundlach said.

The billionaire investor said he’s sticking with a game plan that involves systematic upgrading in fixed income portfolios, adding that this is the “perfect time” to do so as the stock market has rebounded.

“You can get all these yields and you can have all this upside,” he said.