The market segment (0:06) of Round Table Prime’s 2025 edition, among other topics, explores rare bear-steepening in Treasuries, a possible bubble in private credit, an impairment reckoning coming to small and regional banks, AI stock leaders as the bringers of Schumpeter creative destruction to the economy and the S&P 500 at CAPE ratios last seen in 2021, 1999 and 1929. Participating are DoubleLine CEO Jeffrey Gundlach and as moderator DoubleLine Deputy Chief Investment Officer Jeffrey Sherman with their “returning champions” James Bianco, President and Macro Strategist at Bianco Research; Danielle DiMartino Booth, Founder and Strategist of Quill Intelligence; Charles Payne, CEO-Founder of Wall Street Strategies and Fox Business Anchor; and David Rosenberg, Founder and President of economic consultancy Rosenberg Research & Associates. Round Table Prime 2025 was held Jan. 9 at DoubleLine’s downtown L.A. office.
Highlights:
(6:10) The implications of the U.S. debt and deficit spirals for U.S. Treasuries and, as Jeffrey Sherman asks, “When does it matter?” Jeffrey Gundlach says, “It’s starting to matter in real time,” as the volume of new government borrowing and refinancing of existing debt coincides with the higher rates in the Treasury spot market.
(7:17) The de-inversion of the Treasury yield curve in 2024 and the likelihood of further steepening in 2025. “I think we’re going to see more and more issuance at the longer end,” Mr. Gundlach says. “And I think there’s going to be less and less acceptance of it, and those rates might go up.”
(11:31) The rare appearance of a bear steepening in the yield curve, i.e., “the yield curve steepening in the face of higher interest rates,” James Bianco notes. “That is somewhat unusual for the yield curve to invert and steepen that way. Normally it steepens in a falling rate environment with short-term rates falling faster because the Fed is panicking that the economy is weakening and going into recession – not with rates rising and long rates rising faster.”
(25:35) Record corporate bankruptcies in 2024 as forecast by Danielle DiMartino Booth, “a lot of creditor-on-creditor violence,” “double defaulting,” banks on the hook of impaired credits and “bankruptcy in drag.”
(30:04) Equity market allocations, including Magnificent Seven stocks, artificial intelligence plays and the choice of whether to stay in high-momentum positions or close out. “There's never been a group of names that have made this much money, that had this much free cash flow,” says Charles Payne. Among lessons learned in his career, he cites the risk of exiting a winning trade too early. “This is a unique period in time that it’s hard to bet against. At some point the trade will fail, but I think you have to ride it until it does.”
(42:01) China, its equity market, its collapsed bond yields and its barriers to innovation amid, as Mr. Bianco notes, outside the periods of the COVID-19 lockdown and Tiananmen Square crackdown, the lowest levels of GDP growth in 50 years.
(46:55) Japanese equities amid a nascent reversal of Japan’s quantitative easing process. “Liquidity is going to become increasingly constrained, in an economy where it’s had no bounds for decades and decades and decades,” says Ms. DiMartino Booth.
(53:33) U.S. stock market valuations. “Valuation is not a timing tool. Fair enough,” David Rosenberg says. “The one valuation metric goes back 100 years, that is a 10-year smooth multiple, so it covers the entire cycle: CAPE, the cyclically adjusted price-earnings multiple. And right now in January, the S&P 500 CAPE, you know what that number is, right? It’s 37. OK, when was the last 37? December of 2021, and 2022 was not a very benevolent year for a long-only equity manager. It was last year here in 1999 and last here in 1929.”
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.
As DoubleLine’s Deputy Chief Investment Officer, Jeffrey Sherman oversees and administers DoubleLine’s Investment Management sub-committee coordinating and implementing policies and processes across the investment teams. He also serves as lead portfolio manager for multi-sector and derivative-based strategies. Mr. Sherman is a member of DoubleLine’s Executive Management and Fixed Income Asset Allocation Committees. He can be heard regularly on his podcast “The Sherman Show” (Twitter @ShermanShowPod, ShermanShow@Doubleline.com) where he interviews distinguished guests, giving listeners insight into DoubleLine’s current views. In 2018, Money Management Executive named Jeffrey 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. He was a statistics and mathematics instructor at both the University of the Pacific and Florida State University. Mr. Sherman taught Quantitative Methods for Level I candidates in the CFA LA/USC 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 the Claremont Graduate University. Mr. Sherman is a CFA® charterholder.
