In an April 26 overview of the macroeconomy and markets, DoubleLine CEO Jeffrey Gundlach warns (0:54) the Federal Reserve has a “tricky balancing act” on its hands. Inflation is forcing the Fed to raise interest rates even as the U.S. economy stands to suffer a “huge payback” after a stimulus-fueled spikes in consumer spending, in particular, on durable goods. Mr. Gundlach observes that the yield on the two-year Treasury (6:00), which historically has anticipated the level of the Federal Funds rate, is among a number of indicators showing the Fed is behind the curve on raising rates to fight inflation. Looking further out the curve, Mr. Gundlach notes (11:32) the “market has made an honest man of the copper-gold ratio” as a leading indicator of the 10-year Treasury yield. “In fact,” where things stand now,” Mr. Gundlach says, “it looks like the 10-year Treasury yield is slightly too high based upon the copper/gold ratio.”
Notwithstanding the doubling of commodity prices on the Bloomberg Commodity Index over the past two years (10:39), Mr. Gundlach points out that “commodity cycles are very long-lived, and they can go on for many, many years. Commodities have clearly started to outperform risk assets like equities: global equities and U.S. equities.” For investors who maintain some exposure to U.S. equities (14:27), he describes the Nasdaq 100 as an example of a classical definition of a bear market and recommends value over growth stocks. He notes that European stocks (15:37) have outperformed the S&P 500 by more 400 basis points year-to-date, even with Ukraine bringing war to the European Union’s doorstep.
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Mr. Gundlach is CEO of DoubleLine. In 2011, he appeared on the cover of Barron's as "The New Bond King." In 2013, Institutional Investor named him "Money Manager of the Year." In 2012, 2015 and 2016, he was named one of "The Fifty Most Influential" in Bloomberg Markets. In 2017, he was inducted into the FIASI Fixed Income Hall of Fame. Mr. Gundlach is a summa cum laude graduate of Dartmouth College, with degrees in Mathematics and Philosophy.