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Gundlach: 'Something Bad Must Be Happening' With Market Plunge

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By    |   Thursday, 11 October 2018 04:30 PM

Investment guru Jeffrey Gundlach warns that the recent volatility in the global markets doesn’t bode well for the future.

Gundlach predicted in January that stocks would fall this year if Treasury yields climb too fast. He said in a Sept. 18 tweet that if rates on 30-year U.S. Treasuries closed for two straight days above 3.25 percent it would be a “ game changer.” The gauge has exceeded that level since Oct. 3.

“I said [before] ... if the global stock [market] is going to take out the low and put in a new low, something bad must be happening. I don’t think the U.S. can hold in there,” the chief investment officer of bond manager DoubleLine Capital told CNBC.

The bond investor said the S&P 500 was strangely outperforming the rest of the world’s equity markets since the summer.

“What happened as rates broke to the upside ... the global stock market ex-U.S. did take a new leg down and did go to a 12-month low. And it’s interesting the S&P 500 did what I said ... That is join the global stock market on the way down,” said Gundlach, whose Los Angeles-based firm oversees about $123 billion.

Meanwhile, Gundlach wouldn’t be surprised to see Treasury yields leap to new multiyear highs before the bond market calms down.

“If you look at the charts and you look at the way the market’s behaving and you think about the trends that are underneath the bond market, it wouldn’t be surprising at all to see the 30-year [yield] go to 4 percent before this move of the breakout above 3.25 percent is over,” he told CNBC.

“The curve should probably steepen so maybe the 10-year Treasury makes it to 3.5 percent or 3.6 percent during that move,” he added.

He also didn't seem concerned about President Donald Trump's criticism of the Fed.

“I think it’s kind of a myth that the Fed is really all that independent,” Gundlach told CNBC in a wide-ranging interview. “They say they’re independent, but they’re constantly, I think, having discussions about about what’s going on.”

Trump on Wednesday slammed the Fed as “going loco” and today said the central bank was “out of control” because it was unnecessarily raising interest rates and causing the stock market to fall.

Gundlach said the Fed has taken too long to lift rates, which he expects to continue to rise as U.S. deficits increase following tax cuts and budget growth.

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Investment guru Jeffrey Gundlach warns that the recent volatility in the global markets doesn’t bode well for the future.
gundlach, stocks, something, bad
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2018-30-11
Thursday, 11 October 2018 04:30 PM
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