Gundlach Macro Outlook: “Not in My Neighborhood”

In his market and macro outlook recorded March 11, 00:00 DoubleLine CEO Jeffrey Gundlach reprises a theme he has been talking about for the past three years: Americans should diversify part of their investments “away from all U.S.-only investments.”

02:08 A review of risk market valuations, with U.S. risk assets, especially U.S. equities, which entered 2025 grossly overvalued relative to history, versus more moderate valuations on non-U.S. equities, notably European equities. These relative valuations and U.S. dollar weakness helped set up eurozone stocks for unusually high outperformance out of the gate in the new year.

06:06 With the exception of energy, commodities such as copper have shown strength in the first months of 2025. Gold has continued its bull run. “I see a lot of funny forecasts. People say gold’s going to 3,000, which is not much of a forecast when you’re starting out at 2,900 and change,” Mr. Gundlach says. “I think gold will make it to 4,000. I’m not sure that’ll happen this year, but I feel like that’s the measured move anticipated by the long consolidation at around 1,800 on gold.”

07:15 [we’re going to put] Performance year-to-date (YTD) of investment grade bonds, as measured by the Bloomberg US Aggregate Bond Index, versus prior YTD performance for the index over the past 49 years. “It’s a top-decile year so far on performance.”

10:23 A new indicator for anticipating moves in the 10-year Treasury yield. As a forerunner of moves in the 10-year Treasury, the copper-gold ratio “stopped working once the secular declining interest-rate world of disinflation was replaced by a rising secular interest-rate world, which is what I think we’re in now.” The price of crude oil, which Mr. Gundlach says has been working in recent years, “suggests that yields remain high relative to crude oil.” Another indicator, the U.S. Dollar Index, a trade-weighted index of the dollar against currencies of America’s major trading partners, also suggests the 10-year yield could decline further.

12:09 Treasury yield curve steepening, with the yield curve now de-inverted, suggests the odds of recession are increasing. A key signal could come soon if the 12-month moving average of the spread of the 10-year Treasury yield over the two-year yield crosses above zero. Mr. Gundlach thinks the odds of a U.S. recession in 2025 are at 60%.

17:50 [Here is something else…] The “disturbing trend” of federal deficits getting larger every year. Those deficits now have driven the amount of Treasury issuance in the last year to match the extraordinary amounts of buying during the COVID-19 lockdowns.

19:42 Breaking the Keynesian bargain: 1960-2017, Washington ran large deficits to stimulate during high unemployment and shrank spending when people went back to work. Since 2016, even amid low jobless rates, Washington has run large deficits. While Mr. Gundlach does not support the Trump administration’s tax cuts, he says, “I do support the DOGE thing. I would like to find at least $1.5 trillion of (spending) cuts. We’ll see. That seems like a pretty heavy lift.”