Tags: Gundlach | stocks | vulnerable | record

DoubleLine's Gundlach: 'Stocks Are Vulnerable'

By    |   Sunday, 06 April 2014 07:42 PM

While both the S&P 500 and the Dow Jones industrial average hit record highs Friday, star bond investor Jeffrey Gundlach, CEO of DoubleLine Capital, says stocks could be in trouble.

"If you believe [Fed Chair Janet] Yellen is signaling the end of low rates, stocks are vulnerable," he told MarketWatch.

Yellen said in her press conference last month that the Fed may raise short-term interest rates about six months after it ends its bond purchases.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

At this rate of tapering, the quantitative easing may finish as soon as October. That could put a rate hike in April, earlier than market watchers had forecast.

In any case, Gundlach didn't explicitly forecast a market correction, but he said it appears that the S&P 500 won't be able to stay above its 200-day moving average all year.

He cited several bearish factors for the market. Robert Shiller's cyclically adjusted price-
earnings ratios, which take into account 10 years of earnings, look "rich," Gundlach said. He also mentioned record levels of margin debt.

And a decline in margin debt would probably send stocks down, he said. Presumably that would be a sign of less buying interest.

Some investors were encouraged by the March employment report Friday, which showed that jobs increased 192,000.

"It was the sweet spot—not too hot, not too cold," Frank Ingarra, head trader at NorthCoast Asset Management, told The Wall Street Journal. "Too hot would have meant [the Fed] would pull back stimulus, so it might have freaked the market either way."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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While both the S&P 500 and the Dow Jones industrial average hit record highs Friday, star bond investor Jeffrey Gundlach, CEO of DoubleLine Capital, says stocks could be in trouble.
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2014-42-06
Sunday, 06 April 2014 07:42 PM
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