In the commercial real estate sector, Gundlach said his research team noted that just a few months ago, "the market was priced like the world was coming to an end. Then everything rallied with the Fed pivot," despite the fact that consumer delinquencies are getting worse, he said.
"We call this a grabby market. It's an industry phrase; people suddenly lift every offer. There's new issues coming out and they're oversubscribed 20 or 25 times. There's more demand than there is supply of new issues. This is a lazy, complacent market," that reminds him of the period just before the year 2000, he said.
Earnings growth in 2023 rose just 1%, and "yet the entire stock market move is based on momentum and rising valuations relative to present earnings. That has a lot to do with why markets overvalued. Its hard to push it higher from these valuations."
The Fed "is not going to change rates" at the next meeting, Gundlach added.
"They've raised aggressively, about 525 basis points and inflation has come down. And the inflation rate is quite likely to go down with oil where it is today. If Middle East war can't spike oil (prices) I don't know what can."
Regarding the U.S. government's budget deficit, he said: "We've taken national debt to $34 trillion. Our liabilities are bigger than assets."
"We're a hedge fund that's dreading a margin call. We can't meet the margin call. We could always restructure our liabilities. We're going to have that conversation, but it's difficult."
With rising interest rates, the U.S. is also paying an increasing amount for debt service on its obligations.
Even at current levels, "if they leave Fed funds where it is now, the cost of servicing Treasury debt will go up to huge percentage of tax receipts."
Gundlach predicts a recession in the U.S. economy in the middle of this year. And "for sure we see 3,200 on the S&P 500" after the recession hits, he said.