From Bank Stocks to Bullion: Why Christopher Whalen Is Bracing for Market Turmoil

Christopher Whalen, who has spent more than 40 years analyzing bank balance sheets and is a former employee of the Federal Reserve Bank of New York, sold all his bank stocks in late September and opened short positions in consumer lending companies. The head of Whalen Global Advisors and editor of The Institutional Risk Analyst, who previously led research at Kroll Bond Rating Agency, now favors precious metals, the energy sector, and income-generating assets. He considers bank stocks overvalued after nearly eight quarters of declining credit losses: in the third quarter, major banks, including Goldman Sachs, posted record trading profits, but their share prices failed to rise. Whalen expects the period of low credit risk to come to an end, with consumer loan delinquencies increasing as a result of high energy costs and tight household budgets. To bet on falling prices, he bought put options, expecting the underlying stocks to decline over the next six months.

Whalen’s main investment bets are gold and silver, which he began investing in early this year. He considers them assets with asymmetric upside potential because central banks are reducing the dollar’s share of their reserves and turning to gold as an independent reserve asset. The People’s Bank of China purchased about 740,000 ounces of gold in September, the largest amount in three years. However, Whalen does not predict the dollar’s imminent disappearance; instead, he expects competition among fiat currencies to intensify. On Monday, gold traded at around $4,150 per ounce, below the record levels reached earlier in the year. In his view, limited supply will support prices and force major producers to acquire smaller mining companies. He prefers to invest in the gold mining sector through ETFs, avoiding individual stocks because of their high operational risks. He advises retirees to focus primarily on income and allocate 5–10% of their funds to a gold-backed ETF rather than to mining stocks.

Whalen is a strong critic of private equity, especially evergreen funds where companies can be held for 10-15 years or longer, with no defined date for sale. The real value of an asset can be determined only by a sale, and such structures are against the interests of investors and obfuscate valuations for him. He recalls that Joe Kennedy and Franklin Roosevelt fought over securities legislation nearly a century ago because of problems like this. Funds are increasingly moving assets into their own successor funds rather than selling to independent buyers. Data compiled by Evercore and reported by Bloomberg showed the funds accounted for almost half of the $121 billion secondary market in the first half of 2026. In an Oct. 19 newsletter, Whalen said this was grounds to demand the early return of investments: managers continue to collect fees despite failing to fulfilll their original objectives, while genuine market-based price discovery is absent.

The insurance industry is also feeling the effects of these risks as private credit funds buy companies that sell annuities. Whalen suggests owners of these products check the insurer’s credit rating, its track record in meeting obligations, and its involvement in private credit. The failure of 777 Partners was a stark warning, he said, as Josh Wander, co-founder of the Miami-based firm, pled guilty October 15 in a Manhattan federal court to wire fraud and securities fraud. “The financial soundness of the insurer is important because an insurance company’s annuity is essentially the same as a bank deposit,” emphasizes Whalen.

Another source of risk is the artificial intelligence boom, which Whalen believes is absorbing capital needed by the bond market. According to Goldman Sachs, about $500 billion was raised for AI infrastructure this year, although the spending so far has gone primarily toward building data centers rather than AI itself. Together with U.S. government borrowing, this spending has contributed to rising long-term interest rates.

According to the Financial Times, the yield on 10-year Treasury bonds reached 5.36% on October 7, its highest level since 2002. Whalen believes many of these deals form a closed loop: chipmakers finance customers who then buy their products, but the equipment sometimes sits idle because suitable facilities and sufficient electricity are unavailable. In October, Microsoft backed out of a lease for a planned data center near London because its grid connection could be delayed until after 2030. The market is already showing signs of retreat: in the week ending October 16, the Nasdaq 100 fell 5.5%, its worst performance since April 2025, while hedge funds cut their technology positions at the fastest pace since Goldman Sachs began tracking the data in 2016. Whalen believes the market is nearing its limits and urges caution toward Wall Street’s optimistic AI forecasts, as banks expect to profit from future IPOs.

In September, the Federal Reserve (Fed) raised interest rates, but according to CME Group’s FedWatch, the probability of another rate hike on October 28 fell from 58% a month earlier to 17%. Despite market expectations of a rate hike in December, Whalen believes that the economic slowdown will force the Fed to begin cutting rates as early as the first quarter of next year and resume purchasing Treasury securities.

From 2008 through the end of the COVID pandemic, the regulator purchased $10 trillion worth of securities. In Whalen’s view, a one-third reduction in fertilizer use due to high costs could lead to a significant increase in food prices next year. He also notes that both parties in Washington are avoiding any discussion of the budget deficit. Meanwhile, homebuilder confidence fell in October to its lowest level since 2012, and mortgage rates exceeded 7%. Whalen doubts that rates will return to the 5% level many people hope for. When he bought a house in April, he secured a 5.875% rate on a 30-year mortgage, postponing his decision while waiting for Treasury bond prices to rise. He advises homebuyers to consider an adjustable-rate mortgage and then refinance into a fixed-rate mortgage once the Fed eases its policy, as well as compare offers from different lenders. According to him, many borrowers are walking away from deals even after locking in a rate, trying to find better terms, while the contraction of the mortgage market could force smaller lending institutions to close.

Whalen is also writing a book titled “Gold: The Only Standard,” in which he considers gold a measure of inflation and argues against manipulated markets with multiple prices. He proposes that the U.S. Treasury obtain congressional authorization to revalue the government’s gold reserves, sell coins by weight, and publish buy and sell prices daily. Officially, approximately 261 million ounces of gold are valued at $42.22 per ounce, or about $11 billion, whereas at market prices their value exceeds $1 trillion. In Whalen’s opinion, Andrew Jackson, depicted on the $20 bill, would be extremely displeased with its current purchasing power.

Analyzed by Jeremy Shafron