Equity and oil prices moved up slightly Thursday, a day after DoubleLine Capital CEO said investors may want to consider selling into a rebound to avoid further losses.
“I expect a protracted decline in the S&P 500,” said Gundlach, according to a Bloomberg report. “Investors should sell the bounce-back rally which could come at any time.”
The recent drop-off in stock prices is tied to economic weakness, which is playing out in “horrifically weak commodity prices,” the fixed-income specialist stated. “These declines are not causing the economic weakness globally; they are symptoms of the economic weakness globally.”
While Gundlach declined to estimate just how bad and for how long the market’s overall drop would be in 2016, “The primary trend is down at this time,” he said.
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DoubleLine Capital recently rolled out a global bond fund (DLGBX). On a webinar about the new fund Monday, he explained that the firm had wanted to roll out a product focused on mainly developed market, investment-grade bonds denominated in local currencies for some time.
Gundlach specifically wanted to launch such a fund after the dollar had reached a high, which he thinks it has.
On the call, he explained why there is “a myth that the dollar always rallies” after the Federal Reserve raises interest rates. “In fact it’s the opposite. … It’s quite plausible that the dollar will break out to the downside.”
Speaking with Reuters on Wednesday, Gundlach said the pummeling of equity and credit markets could mean that “margin calls are going on.”