While Washington pundits and national pollsters predicted a Clinton victory, DoubleLine CEO Jeffrey Gundlach leaned the other way, basing his views on a variety of factors, including economic trends and other data, which – as a trained mathematician – he follows closely.
Speaking Tuesday, before any results were reported, Gundlach said the Republican candidate had “massively outperformed” expectations during the election campaign.
“When Trump was just an asterisk in the polls, I said he was a tremendously undervalued asset,” the Bond King explained – noting that the two candidates were at “a darn near tie in the polls.”
As early as February, Gundlach said he “kind of” expected Trump to win. One month later, he noted, “You have to entertain [such a] hypothetical” outcome.
And in May, he expressed even more conviction, stating, “I think Trump is going to win. I just have a feeling that he’s going to win. I think you need to prepare for a Trump presidency.”
As asset manager Michael Khouw of Optimize Advisors and other market watchers pointed out on Twitter early Wednesday, “Jeff Gundlach was right.”
In earlier calls with investors, the fixed-income specialist points to Trump’s Reagan-like slogan “Make America great again!”
“Trump has a gift for finding the soft spot in people and exploiting it pretty effectively,” he explained.
Clinton, on the other hand, employed a logo with an arrow and represented the status quo. “With Hillary you’re going sideways,” Gundlach stated.
It’s the Economy, Stupid!
While Bill Clinton zoomed in on the impact voters were feeling in their wallets in the 1990s, it was Trump who appears to have done so in 2016.
Gundlach, who combs through economic and financial data daily and shares at least several dozen tables with investors on his quarterly calls, had recently pointed September’s jobs report as a sign that investors should be on alert for a U.S. recession: The unemployment rate breached its 12-month moving average.
At the same time, that month’s non-farm payrolls report showed the unemployment rate ticking up to 5%, while the 12-month moving average held steady at 4.9%.
Over the past year, the trend in the unemployment rate has flipped from improving to deteriorating, he has pointed out.
DoubleLine reported Friday that total non-farm payrolls increased by 161,000 in October, but that was down from 191,000 in September.
Plus, while the unemployment rate was 4.9% in October, the labor force participation rate declined to 62.8%, the bond-shop said.
Overall, DoubleLine’s latest research report shows the “trend-line” for jobs being added to the U.S. economy has been on a downward track since June – for both data generated by the Bureau of Labor Statistics (BLS) and by Automatic Data Processing (ADP).
In May, Gundlach said he thought Donald Trump’s chance of winning the general election had been “underestimated” for months. He also argued that Trump is a “better campaigner” than Clinton.
“People are going to start putting greater focus on Hillary. Voters are going to say, ‘No. I don’t want this,’” he told Reuters. “Hillary is going to evolve into an unacceptable choice.”
“A Trump win could bring a huge increase in the budget deficit and could produce some short-term economic gain but then compound our problems,” he explained during a conference call earlier this year.
“If you think this election cycle is crazy, you haven’t seen nothing yet!” Gundlach said, referring to a fiscal crisis tied to entitlement programs and other government commitments.
Speaking to Reuters on Wednesday, Gundlach said he thinks Trump will move to raise growth and inflationary pressures, which are negative for government bonds.
“He loves debt, and he said in May that ‘I am comfortable with debt,’” explained the DoubleLine CEO. “His policies are not supportive of long-term interest rates.”
Gundlach explained that he thinks some national polls had been misrepresenting Trump’s support by 6 percentage points.
“No one is trash talking me today,” he said.
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