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Bond Market Is Ridiculously Oversold – Jeff Gundlach

Jeff Gundlach, one of the few people to have called Donald Trump winning the election even before the Primary was over, had his first broadcasted interview in 2017 with Fox Business (1/10/17). He is the billionaire “bond king” and founder of DoubleLine Capital who has amassed more than $100 billion in assets under management in just over 7 years.

What does the future hold for US markets and economy now that Donald Trump is in the office?

  • Trump had pulse on forgotten people in rural America and middle-class; thought Hillary was just a weak candidate; not terribly enthusiastic but voted for Trump
  • Days before election, major research firms talked about global depression and a major investor said S&P would drop 80% if Trump were to win; the same week after the election, crawlers saying Trump is great for stocks; haven’t seen such a 180 degree turn in sentiment ever in politics and financial market
  • With rounding, DOW is basically at 20,000 and thinks we’ll reach a new high in stock markets
  • Problem will come in the middle of the year when interest rates go up (interest rates are dropping a little bit right now because bond market is ridiculously oversold and positioned against) – will eventually move towards 3% in the 10-year
  • US market seems very expensive relative to global markets; when foreign markets and emerging markets do well, investors fall in love with foreign stocks because they are up; we are in the opposite situation now where US market has done very well and other markets have not done nearly as well; investors should look to diversify using this relative weakness away from the US
  • Not bearish on the US market but a good time to diversify
  • Pattern that is pretty predictable: after election, you see enthusiasm and good sentiment; period right before or right after inauguration, you tend to see it peak
  • Don’t have much of a warning on stock markets right now
  • Interest rates bottomed in July on the 10-year at 1.32% and at that time, monumental belief in treasury bonds – lots of headline saying that yield will never rise; in this business, when you hear the word “never”, it’s about to happen
  • 2.64% intraday high recently; thinks that almost certainly, it will peak at 3%; if it goes above 3%, from a chart perspective, you have to say unequivocally that the bond bull market is over
  • Corporate taxes being cut is positive for stocks but what about tariffs on certain industries? It’s very complicated as it impacts supply chain and just because something is manufactured overseas, doesn’t mean that it is just that country’s work – all of these things are not linear
Image source: Bloomberg
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1 Comment on Bond Market Is Ridiculously Oversold – Jeff Gundlach

  1. I follow Mr. G’s advice and divested 20% out of my Doubline Bond funds and Bought His new DSEN Equity Fund & his new DSL, EM fund..

    Like

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