Jeffrey Gundlach: Fed Needed ‘Stun and Done’ Hike of 50 bps

DoubleLine CEO-CIO Jeffrey Gundlach joins CNBC following Federal Reserve Chairman Kevin Warsh’s Federal Open Market Committee (FOMC) press conference, calling the FOMC’s hike of 25 basis points (bps) a case of too little, too late. Mr. Gundlach says he would have dissented in favor of 50 bps, what he dubs “stun and done,” pointing to sustained inflation metrics. He’s skeptical of the Fed’s new subcommittees, comparing them to a struggling business hiring consultants who “always want to figure out what the people at the company really want to hear” rather than deliver hard truths. He also draws a sharp parallel between AI mania today and COVID-19 vaccine guidance, joking that the current mood has shifted from “AI is going to let us all retire and live on Tahiti” to “we’re all going to be dead by the end of the decade.”

On markets, Mr. Gundlach flags a widening gap in credit, noting AI-related investment grade (IG) bonds have widened 50 bps in recent months while the rest of the IG market has barely moved. It’s a sign the market simply “does not believe the ratings that are on these AI bonds.” He continues to favor the equal-weighted S&P 500 over the cap-weighted index, sees no reason to buy long-term U.S. Treasuries without a real yield over inflation and remains constructive on emerging markets local currency debt. On the Treasury Department’s expanded bond-buyback program, he isn’t impressed, dismissing it as “kissing your sister” and arguing a much larger effort will be needed to meaningfully move yields.