DoubleLine Deputy CIO Jeffrey Sherman Covers Global Growth, Inflation, Rates
In this Feb. 8, 2022, webcast, Jeffrey Sherman, Deputy Chief Investment Officer of DoubleLine Capital LP, covers his outlooks for global growth, inflation and interest rates, with a more granular inspection of those subjects and the labor market in the U.S. Mr. Sherman (01:51) suggests the world might be undergoing a transition in growth leadership from the U.S. to emerging markets and Europe. Within the U.S., the leading economic indicators, he says (06:00), show the economy is still in the expansionary part of the business cycle, and if inflation surprises to the upside, the U.S. could produce higher-than-expected nominal GDP growth.
“Inflation is everywhere – and everywhere at very elevated levels,” Mr. Sherman observes (17:15). In a chart of consumer price indexes for the world and for emerging and developed markets, he points out the “very rare” phenomenon of DM inflation outpacing that of EM and worldwide inflation. Decomposing the inputs to the U.S. CPI (20:22), he says an expected moderation in coming months in consumer goods inflation will likely be offset at least to some degree by rising prices in the services inputs of the index, particularly from the rising cost of shelter, on display for many months in house price appreciation and making its way into rents. Thus, Mr. Sherman sees U.S. inflation remaining elevated for the foreseeable future. Further out in time, he says (29:42), the zero-coupon inflation swap market is pricing in lower inflation, but he does not see the world returning to the times of sub-2% inflation.
Turning to the U.S. labor market (31:52), Mr. Sherman notes that the unemployment rate is roughly back to its pre-pandemic level, perhaps at full employment. However, he qualifies that statement by observing that the U.S. has 2.9 million fewer nonfarm jobs than at the previous peak in the Bureau of Labor Statistics nonfarm payrolls report. His readings of average hourly earnings, up 6.9% year-over-year, and the Atlanta Fed’s Wage Growth Tracker, up 4.5%, suggest employees will have the upper hand over employers, compelling higher wages in 2022 as in 2021.
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As DoubleLine’s Deputy Chief Investment Officer, Jeffrey Sherman oversees and administers DoubleLine’s Investment Management sub-committee coordinating and implementing policies and processes across the investment teams. He also serves as lead portfolio manager for multi-sector and derivative-based strategies. Mr. Sherman is a member of DoubleLine’s Executive Management and Fixed Income Asset Allocation Committees. He can be heard regularly on his podcast “The Sherman Show” (Twitter @ShermanShowPod, ShermanShow@Doubleline.com) where he interviews distinguished guests, giving listeners insight into DoubleLine’s current views. In 2018, Money Management Executive named Jeffrey Sherman as one of “10 Fund Managers to Watch” in its yearly special report. Prior to joining DoubleLine in 2009, Mr. Sherman was a Senior Vice President at TCW where he worked as a portfolio manager and quantitative analyst focused on fixed income and real-asset portfolios. He was a statistics and mathematics instructor at both the University of the Pacific and Florida State University. Mr. Sherman taught Quantitative Methods for Level I candidates in the CFA LA/USC Review Program for many years. He holds a B.S. in Applied Mathematics from the University of the Pacific and an M.S. in Financial Engineering from the Claremont Graduate University. Mr. Sherman is a CFA® charterholder.
