DoubleLine Deputy CIO Jeffrey Sherman, joins Bloomberg’s “Real Yield” on Oct. 10 to discuss the macroeconomic crossroads facing markets. Mr. Sherman emphasizes that both inflation and labor data have left the Federal Reserve in a challenging position – caught between moderating inflation pressures and signs of weakening labor demand. He notes that the Fed’s recent “risk management” rate cut was likely to be followed by another, though future moves will depend heavily on incoming data amid limited government reporting. Mr. Sherman also warns that core goods inflation has reemerged due to tariffs, suggesting potential price pressures as companies rebuild inventories under the new trade regime. He highlights that these inflation dynamics – combined with uncertainty around tariffs and supply chain costs – could keep the Fed cautious through year-end.
Turning to markets, Mr. Sherman discusses the growing “debasement trade,” marked by renewed flows into gold, silver and Bitcoin as investors hedge against fiscal excess and a potentially overvalued U.S. dollar. He observes that while U.S. breakevens remain anchored near the Fed’s 2% target federal funds rate, the long end of the global yield curve reflects investor skepticism toward sovereign debt amid rising fiscal deficits. Regarding credit markets, Mr. Sherman cautions that recent stress events like the First Brands bankruptcy underscore excessive risk-taking in leveraged loans and private credit. He warns that yield compression and capital chasing illiquid assets are fueling structural vulnerabilities, though he does not foresee imminent contagion. Overall, Mr. Sherman backs a cautious but pragmatic approach – one balancing near-term monetary accommodation with longer-term concerns about inflation persistence, credit discipline and the sustainability of global fiscal policy.
00:00 – Introduction: The Macro Crossroads 00:25 – The Fed’s Dilemma: Labor vs. Inflation 01:45 – Tariffs and Inflation Pressures 03:40 – The Debasement Trade and the Dollar 05:20 – Bond Market Signals and Global Yields 06:45 – Credit Market Stress: Lessons from First Brands 08:45 – Private Credit Risks and Opportunities 10:45 – Closing Thoughts: Market Discipline Ahead
Jeffrey Sherman, DoubleLine’s Deputy Chief Investment Officer, is a thought leader, portfolio manager and public speaker in the industry. Mr. Sherman is a member of DoubleLine’s Fixed Income and Global Asset Allocation committees, and he serves as lead portfolio manager for the firm’s multi-sector and derivative-based strategies. In his role, Mr. Sherman guides the investment teams in developing top-down macro views and collaborative asset allocation processes throughout a market cycle. Additionally, he is a member of DoubleLine’s Executive Management Committee. In 2018, Money Management Executive named Mr. Sherman as one of “10 Fund Managers to Watch” in its yearly special report. Prior to joining DoubleLine in 2009, Mr. Sherman was a Senior Vice President at TCW, where he worked as a portfolio manager and quantitative analyst focused on fixed income and real-asset portfolios. Prior to that, he was a statistics and mathematics instructor at the University of the Pacific and Florida State University. Mr. Sherman taught Quantitative Methods for Level I candidates in the USC/CFALA CFA® Review Program for many years. He holds a B.S. in Applied Mathematics from the University of the Pacific and an M.S. in Financial Engineering from Claremont Graduate University. Mr. Sherman is a CFA® charterholder.
