DoubleLine Portfolio Manager Ken Shinoda returns with his latest Channel 11 update, Judgement Day, in a nod to the AI dominance of markets this year. On the surface, the S&P 500 Index looks like it has gone sideways, but underneath there has been real rotation. The Mag 7 are roughly flat since last October, while equal weight, small caps and international markets have quietly caught up. While nearly every major index and commodity has risen double digits on the year, led by energy’s surge amid the Middle East conflict, Mr. Shinoda flags a growing divergence within corporate credit worth watching: Several investment grade hyperscaler bonds, including those of Oracle and SpaceX, are trading at spreads wider than the high yield BB index, suggesting the market sees more leverage risk in these names than their official ratings reflect.
On rates, a more hawkish tone out of Jackson Hole has pushed the probability of a federal funds rate hike this month back above 60%, driving the two-year U.S. Treasury yield up nearly 100 basis points on the year and the 10-year toward its highs, retesting the psychologically important 4.75% to 5% level. Mr. Shinoda continues to see this as a global phenomenon rather than a U.S.-specific story, given similar pressure building in long-term rates abroad. With credit spreads remaining broadly resilient and rates the primary driver of fixed income returns this year, he continues to favor short duration and securitized credit, seeing little reason to chase equities into a seasonally weaker September without some pullback first.
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.
