DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough analyze two weeks ended April 10 of markets convulsed by the fog of war, then unleashed by a no-less nebulous ceasefire. Macro news similarly was dwarfed by events in and around the Persian Gulf.
“This is not an easy market to see through,” Eric comments. “There’s a lot of fog of war, impeding investors’ ability to discern the fair price of securities right now.” As Exhibit #1, Eric cites the dramatic dispersions in stocks (2:18). For example, he points out the selloff in the SP 500 in the wake of the outbreak of war on Feb. 28 and the ferocious rally after the ceasefire announcement.
Fixed income (6:56) likewise witnessed a selloff in rates, sending the Bloomberg U.S. Aggregate down about 1 1/2% after the bombs started dropping, but “April to date it’s up 29 basis points,” Eric says. “These competing forces on interest rates are duking it out: the short-term inflationary impulse and the longer-term inflationary impulse from the fiscal overhang because the war costs money and potentially increases deficits.” Commodities (11:24) were no exception to the split-personality markets, surging 34% from Feb. 27 but giving up about 5% in April month-to-date.
Mark Kimbrough, while warning “economic data are being dwarfed by the impact of the headlines,” covers the macro reports (15:58) for the past two weeks. These include expected war-related spikes in energy prices and a drop in the U-3 unemployment rate to 4.3%. Mark cautions that the drop in joblessness was largely due to jobseekers dropping out the labor pool.
Surveying the release of the March 18 FOMC meeting minutes, Mark sees “more support for the Fed to sit on their hands,” notwithstanding rising hopes among traders for fed funds cuts this year.
“The fog of war is the state of ignorance in which commanders find themselves … not only of their enemies, but also of their friends.” Sir Lonsdale Augustus Hale, The Fog of War (1896)
“we now see through a glass darkly” Paul of Tarsus, I Corinthians 13:12 (circa 53-55 C.E.)
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Mr. Dhall joined DoubleLine in 2013. He is a Portfolio Manager on the Macro-Asset Allocation team where he works with portfolio management performing analysis and trading for derivatives-based and multi-asset strategies. Mr. Dhall’s research and analysis has contributed to the team’s development of DoubleLine’s smart-beta suite of strategies. Prior to DoubleLine, he worked at Capital Group performing quantitative analysis in fixed income. Prior to Capital Group, Mr. Dhall was an instructor in finance at the UCLA Anderson School of Management and a research instructor at the UCLA Samueli School of Engineering. Previous to that, he worked in International Finance at Gulf Machinery Company. Mr. Dhall holds a B.S. in Physics with a secondary emphasis in Business from the University of California, Berkeley and an M.S. in Financial Engineering from the UCLA Anderson School of Management.
Mr. Kimbrough joined DoubleLine in 2012, where he worked primarily on Agency Mortgage Backed Securities and the Fixed Income Asset Allocation process as a member of the Risk Analyst team. He transitioned to his current role in 2019 where he serves as an Analyst on the Macro Asset Allocation team. Prior to DoubleLine, Mr. Kimbrough was at Western Asset Management working on systems monitoring and development within the Risk Department. He holds a BS in Business Administration with a concentration in Real Estate Finance and a minor in Economics from the University of Southern California. Mr. Kimbrough is a CFA® charterholder.
