Ken Shinoda, Portfolio Manager at DoubleLine Capital and Chairman of the firm’s Structured Products Committee, covers the gains across equity, fixed income and commodity markets in March, subsequent pricing action and a noteworthy improvement in certain leading macro indicators, including Manufacturing PMI. As a result, Mr. Shinoda notes, “U.S. economists are forecasting stronger economic growth than they did about a year ago for the year 2024. And this is again all why equities have moved higher.”
Among other topics treated in this episode of Channel 11, recorded April 9, 2024, Mr. Shinoda discusses:
(2:31) The outlook on inflation, including the roll-off of positive base effects that had contributed to lower year-over-year inflation readings, potentially resulting in more stubborn inflation levels in the future, contributing to higher interest rates for longer.
(3:42) A rollover in housing rents, on the back of a “ton of new multi-family supply hitting the market,” a factor that should help ease pressure on headline and core inflation.
(4:23) Signs of lower wage and labor pressures, including a falling quits rate and reduced small-business hiring, perhaps presaging lower price pressures in the services sector of the economy. Mr. Shinoda also warns that these signs of weakness should give a moment of pause to people who are pricing in a “no landing” scenario for the economy.
(7:22) Recovering consumer sentiment.
(7:50) Among downside risks, the prospect of “higher-for-longer” borrowing rates. Higher rates already are putting the squeeze on commercial real estate; higher-for-longer could do the same to corporate borrowers, many of whom, due to the lack of bank lending, have turned to private lenders of floating-rate loans.
(9:27) Interest rates across the Treasury curve, the market pricing (as of the time of the episode recording) of future levels of the federal funds interest rate, and Mr. Shinoda’s sanguine view on the actual timing of rate cuts in 2024.
(12:45) Fixed income in March (positive across all major sectors), followed by a back-up in yields in the first part of April.
(14:01) What’s Cheap: DoubleLine’s report on which parts of the fixed income universe are attractive relative to others. Spread tightening, Ken Shinoda notes, which has driven big rallies in investment grade and high yield corporate bonds, and in emerging markets corporates, has been coming to securitization markets, with the exception of Agency mortgage-backed securities. (16:40) Equity performance in March (broad gains, led by the Nikkei).
(17:49) Commodity performance (broad gains across energy, industrial metals, precious metals and agriculture). In particular, Mr. Shinoda calls out an Asia-driven surge in gold prices.
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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.
