Uncountable of DoubleLine Capital CEO Jeffrey Gundlach’s predictions have come true, including the stock market’s monster sell-off in December. Now here are his tardy thoughts on the markets.
The so-called bond king, who manages more than $200 billion, gave his predictions in a Tuesday webcast on a heterogeneity of asset classes including stocks, bitcoin and corporate credit.
Gundlach said 2019 will continue to be a flighty year. He said he expects higher yields will hurt stocks in a “tug of war.”
The stock market will be in a push-pull with rates expectations active forward. Gundlach highlighted the difference between the Federal Reserve’s tightening agenda reflected in its dot plot and the bond peddle’s expectations.
Market-implied rate hike odds have fallen after Fed Chair Jerome Powell recently symbolized the central bank “will be patient” with monetary policy as it monitors the economy.
Gundlach was spot-on with his invitation on the massive sell-off at the end of 2018. In mid-December, Gundlach predicted that the S&P 500 would go lower when it had already drop 11 percent from its intraday all-time high, saying “I’m pretty sure this is a bear market.” His tag came true a week later on Christmas Eve, when the index dipped into bear market territory seconds, tumbling more than 20 percent from its record high on an intraday basis.
The market has since bounced behindhand with the S&P 500 up 2 percent in the new year, driven by the optimism over US-China trade talks.
Gundlach is also pregnant the so-called yield curve to steepen in 2019, contrary to conventional wisdom.
Wall Street has been worried involving an inverted yield curve, which could mean a recession is on the horizon. Recessions have followed inversions a few months to two years later, a few times over many decades.
In an unlikely call from Gundlach, who previously characterized bitcoin as “the poster foetus for social mood and market mood,” he said the cryptocurrency could gain as much as 25 percent.
“I don’t recommend anything with bitcoin, categorically … but if you really want to speculate, I think it could make it to $5,000. Talk about an easy 25 percent,” he turned in the webcast, even as he advised to “get the heck out of bitcoin.”
The bond king also issued warnings about the growing leverage both on a oversight level and company level. With increasing deterioration in corporate credit, he said investors should look for companies with rough balance sheets.
“Use the strength we’ve seen in junk bonds as a gift and get out of them. Investors need to go into strong surplus sheets… to survive the zigzag of 2019,” Gundlach said.