DoubleLine Portfolio Manager Jeff Mayberry returns as a guest to share his market and macro outlooks for 2023 with DoubleLine Deputy Chief Investment Officer Jeffrey Sherman and Portfolio Manager Samuel Lau. Noting Mr. Mayberry gave his outlooks a year ago for 2022, Mr. Sherman reviews Mayberry’s score card (1:15) for the year gone by. Among those 2022 calls, one of Mr. Mayberry’s most contrarian forecasts (4:28), which proved to be true, was the Federal Reserve would tighten a lot without weakening the labor market. This episode was recorded Jan. 19, 2023.
Turning to the future, the discussion goes into Mr. Mayberry’s expectations for the Fed’s rate-hiking campaign (4:45). Mr. Sherman (6:51) asks about the divergence between market pricing and the Fed’s forward guidance on the fed funds rate, which leads to Mr. Mayberry sorting out the market mechanism as a “probability machine.” The discussion eventually takes up the idea (13:36) that the Fed follows the bond market, especially the two-year Treasury yield, and to what extent, if any, the Fed can push back against market-priced expectations.
With the December prints of the Personal Consumption Expenditures Deflator due Jan. 27, Samuel Lau notes that Fed Chair Jerome H. Powell’s preferred inflation metric, the Core PCE Deflator, has been falling (15:11). He asks what will the Fed do if that gauge falls below the current fed funds rate? Mr. Sherman asks his guest (20:06) for areas of the fixed income universe where investors are getting paid to take credit risk and areas to avoid. While people are focused on the Fed’s management of the fed funds rate, the discussion notes (30:50) that the Fed has quietly been pursuing another path to tighter financial conditions: balance-sheet reduction, aka quantitative tightening (QT).
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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.
Mr. Lau joined DoubleLine in 2009. He is a Strategist on the Fixed Income Asset Allocation (FIAA) Committee and a contributing member on the Global Asset Allocation and Macro committees. Mr. Lau is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives-based and multi-asset strategies, including DoubleLine's Shiller Enhanced CAPE®, Shiller Enhanced International CAPE®, Real Estate and Income, and Multi-Asset Trend strategies. He also co-hosts the Sherman Show (Twitter @ShermanShowPod, ShermanShow@Doubleline.com) and Monday Morning Minutes (Twitter @DLineMinutes, Minutes@Doubleline.com) podcasts. Prior to DoubleLine, Mr. Lau was a Vice President at TCW where he worked under Jeffrey Gundlach as a Research Analyst in the Mortgage Group. He holds a B.S. from the University of Wisconsin, Madison and an MBA from the Marshall School of Business at the University of Southern California.
Mr. Mayberry joined DoubleLine in 2009. He is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives‐based and multi‐asset strategies. Mr. Mayberry is a Strategist on the Fixed Income Asset Allocation (FIAA) committee and a contributing member on our Global Asset Allocation and Macro committees. He also co-hosts DoubleLine’s weekly Monday Morning Minutes (Twitter @DLineMinutes, Minutes@Doubleline.com) podcast. Prior to DoubleLine, Mr. Mayberry was a Senior Vice President at TCW for nine years within the Mortgage Group, where he specialized in portfolio and fund monitoring and analytics. He holds a B.S. in Engineering from Harvey Mudd College and an M.S. in Financial Engineering from the Peter F. Drucker Graduate School of Management at Claremont Graduate University.