DoubleLine Portfolio Manager Ken Shinoda returns with his latest Channel 11 update at a time when a sideways S&P 500 Index hides a sharp change in leadership underneath. The Mag 7 have gone from market leaders to laggards, equal weight is outperforming, and the tech momentum factor has fallen below where it was in the dot-com bust. With the bears out in force, Mr. Shinoda thinks “everyone’s way too negative.” In his own view, the tech sell-off is oversold, and a relief rally is possible once the midterms pass. Crypto and gold have been weak as investors raise liquidity, while the bond market has rallied on quarter-end rebalancing, a flight to quality and stress in France.
Mr. Shinoda doesn’t think the rally changes the bigger picture. “Who says inflation is coming back down to 2 when prices of stuff is up above the highs of 2022?” he asks, and he expects rates to go back up after the midterms, with 5.25% on the 10-year the new center of gravity. In fixed income, he says the winning approach keeps working: stay short and earn yield at the front of the curve. It’s “not super sexy,” but investors can still collect extra yield over Treasuries and sleep at night. He also flags a growing divergence in credit, with weaker names punished and AI-related bonds widening. Mr. Shinoda concludes with a theme he has returned to all year: don’t be long tech twice.
Mr. Shinoda joined DoubleLine at inception in 2009. He is Chairman of the Structured Products Committee and oversees the non-Agency RMBS team specializing in investing in non-Agency mortgage-backed securities, residential whole loans and other mortgage-related opportunities. Mr. Shinoda is co-Portfolio Manager on the Total Return, Opportunistic Income, Income, Opportunistic MBS and Strategic MBS strategies. He is also lead Portfolio Manager overseeing the Mortgage Opportunities private funds. Mr. Shinoda is also a permanent member of the Fixed Income Asset Allocation Committee, as well as, participating in the Global Asset Allocation Committee. In addition, he hosts DoubleLine’s “Channel 11 News” (Twitter @DLineChannel11, dline11@doubleline.com), a webcast series that provides market insights and commentary with peers and industry experts. Prior to DoubleLine, Mr. Shinoda was Vice President at TCW where he worked in portfolio management and trading. He holds a B.S. in Business Administration from the University of Southern California and is a CFA® charterholder.
