DoubleLine Capital, Released on 5/3/22 (Recorded on 4/26/22)

*This interview was recorded on April 26th, 2022

In an April 26 overview of the macroeconomy and markets, DoubleLine CEO Jeffrey Gundlach warns (0:54) the Federal Reserve has a “tricky balancing act” on its hands. Inflation is forcing the Fed to raise interest rates even as the U.S. economy stands to suffer a “huge payback” after a stimulus-fueled spikes in consumer spending, in particular, on durable goods. Mr. Gundlach observes that the yield on the two-year Treasury (6:00), which historically has anticipated the level of the Federal Funds rate, is among a number of indicators showing the Fed is behind the curve on raising rates to fight inflation. Looking further out the curve, Mr. Gundlach notes (11:32) the “market has made an honest man of the copper-gold ratio” as a leading indicator of the 10-year Treasury yield. “In fact,” where things stand now,” Mr. Gundlach says, “it looks like the 10-year Treasury yield is slightly too high based upon the copper/gold ratio.” Notwithstanding the doubling of commodity prices on the Bloomberg Commodity Index over the past two years (10:39), Mr. Gundlach points out that “commodity cycles are very long-lived, and they can go on for many, many years. Commodities have clearly started to outperform risk assets like equities: global equities and U.S. equities.” For investors who maintain some exposure to U.S. equities (14:27), he describes the Nasdaq 100 as an example of a classical definition of a bear market and recommends value over growth stocks. He notes that European stocks (15:37) have outperformed the S&P 500 by more 400 basis points year-to-date, even with Ukraine bringing war to the European Union’s doorstep.

Jeffrey Gundlach is the Chief Executive Officer and Chief Investment Officer of DoubleLine Capital. He is recognized as an expert in bond and fixed income investments. His investment strategies have been featured in leading publications from around the world In 2013, he was named “Money Manager of the Year” by Institutional Investor. He is a graduate of Dartmouth College summa cum laude holding a BA in Mathematics and Philosophy. He attended Yale University as a PhD candidate in Mathematics.

  bonds, economy, federal reserve, inflation, Jeffrey Gundlach, markets, stocks