DoubleLine’s Jeffrey Gundlach on Fed Uncertainty, Private Credit Pitfalls and Waning Momentum of U.S. Exceptionalism

Jeffrey Gundlach, CEO-CIO of DoubleLine Capital, joined CNBC’s Scott Wapner live from the NYSE on May 7 to discuss Federal Reserve Chair Jerome H. Powell’s Federal Open Market Committee press conference. Mr. Gundlach emphasizes the uncertainty surrounding the Fed’s decisions, noting Chair Powell’s repeated use of phrases like “too early to know” and “we don’t know.” Mr. Gundlach highlights the agency’s cautious approach, likening it to the Hippocratic oath: “Above all, do no harm.” He expresses concern about rising unemployment and inflation, suggesting that the Fed is navigating “uncharted waters” around tariffs and might need to consider unconventional policies like yield curve control if long-term interest rates rise amid economic weakness.

Mr. Gundlach also discusses the broader economic backdrop, pointing out the unusual behavior of long-term interest rates during the Fed’s easing cycle. He mentions that despite 100 basis points of cuts, long rates are up, which could continue as the economy weakens. Mr. Gundlach warns of potential liquidity issues, referencing Harvard’s need to tap the bond market for operating cash due to its high allocation in private equity and credit. He highlights the importance of being cautious and prepared for further economic challenges, stating, “We believe in dry powder for another leg down on risk assets.”

Additionally, Mr. Gundlach touches on the American exceptionalism trade, suggesting it might be more of a momentum trade that could unwind as money flows out of the U.S. and into Europe. Mr. Gundlach also expresses skepticism about the sustainability of private credit, comparing it to the subprime crisis and warning of its potential risks. He concludes by emphasizing the need for investors to diversify and be prepared for a changing economic landscape, particularly with the U.S. dollar potentially weakening in the next recession.

00:00 - Fed Policy and Economic Uncertainty
04:01 - Market Positioning and Asset Allocation
06:43 - Illiquidity and Private Credit Risks
15:00 - Fed's Dilemma and Policy Response
20:31 - Investment Strategy and Market Outlook
24:33 - Global Flows, Dollar Outlook and US Exceptionalism
30:06 - Fiscal Policy, Deficit, and Structural Risks