Do these markets feel “healthy” to you? Some experts say to pull back on stocks

Many investors have taken a half-cocked look at the markets lately. But others see that the glass is cracked.

On Monday, as stocks fell to start a busy week, the latter group appeared to have a stronger grip on the microphone. The VIX, Wall Street’s so-called fear index, was recently around 23, creeping further into territory associated with anxiety. CNN’s recent anxiety scale indicated “extreme fear.”

Veteran bond investor Jeffrey Gundlach now says that almost all financial assets appear overvalued — and he notes atypical relationships across asset classes. Credit defaults are hiding cockroaches, and AI stock valuations are being compared to the dot-com bubble — though NVDA’s (NVDA) earnings, which could give the stock a boost, are still just days away.

Some investors are reducing their exposure to stocks. Discretionary investors were underweight in stocks again, moving to the bottom of a positioning range that had been in place since the tariff tantrum in early 2025, a Deutsche Bank report showed. In the third quarter, the Saudi sovereign wealth fund reduced its positions in US stocks, according to what Reuters reported. Financial Times.

“The US stock market feels the ‘least healthy’ in decades, across classic valuation metrics including price-to-earnings and CAPE ratios,” Gundlach said in the latest episode of the podcast. Bloomberg Podcast Stranger Lot. Gundlach said investors should avoid a 60/40 portfolio and not own more than 40% of stocks, with most of them outside the United States. 25% in bonds; 15% gold (before the precious metal’s rise, he said 25% was ideal); The rest is in cash.

This market, according to Gundlach, is different from the markets of the past. For example, he said interest rates on short- and long-term Treasuries have historically fallen when the Fed moves to cut its benchmark interest rate, but outside of two-year bonds, yields are higher than they were before the first cut. Meanwhile, he said, the US dollar rose as stocks fell in the last 12 S&P 500 corrections since 2000, but in March and April, the dollar swoon along with stock markets.

“It seems that what is ‘flight to quality’ and what is not has changed,” Gundlach said.

Not everyone is bearish. Fundstrat Global, the financial services firm led by Tom Lee, attributes volatility in markets to self-fulfilling media-driven narratives, and neither the store’s head of data science nor its head of technical strategy agree that an AI bubble exists. They said a catch-up rally in December might be possible.

Doug Pitta, chief US investment strategist at BCA, is on the fence, but said “the strength of the AI ​​narrative makes this look increasingly like the dot-com boom.” However, he said there are troubling signs: That S&P 500 earnings growth is lagging — companies that sell discretionary goods and appliances, for example, are economically exposed and consumer-facing sub-industries that could be “a sign that the expansion is less robust than widely perceived.”

“It does not inspire confidence when more cyclical corporate earnings growth lags the overall market by 20 percentage points,” Beta wrote in a report Monday that pointed to the S&P 500’s closing high, on Oct. 28.

“We don’t know yet how long the current bull market will last,” he said, “or whether it has actually ended” that day.