DoubleLine Capital CEO and Chief Investment Officer Jeffrey Gundlach sees oil prices moving as low as $70 per barrel and the Federal Reserve raising rates next year.
“I think the Fed will probably raise rates not for fundamental reasons,” Gundlach said on CNBC’s “Squawk Alley” on Monday. “The fundamental reasons for raising rates are completely absent, particularly the inflation argument, which has become completely debunked – particularly [regarding] commodity prices, which are the same as they were in 2010. We’ve had four months in a row of the CPI being zero.”
On the other hand, the Fed feels it must make some policy shift.
“The Fed should not be raising interest rates, and yet they don’t want to be at zero. They’re in a conundrum,” he said. “They might raise rates just to see what happens.”
As for where consumer prices, specifically oil are headed, the fixed-income expert sees oil prices in the mid-$70s or lower, Gundlach says.
The U.S. dollar is poised to appreciate, he adds, “particularly if the Fed raises rates.”
“Sometimes consensus is right,” especially when it comes to currency trends, “which are incredibly powerful and long lived,” the DoubleLine executive said.
As for the Japanese yen, “Everyone thinks it could go to 125 and 140 [to the U.S. dollar], as I do, and even 200 ultimately. In the short term, anything can happen, and with a raise in rates, the dollar should appreciate.”