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December 06, 2017 at 06:11 AM
DoubleLine Funds CEO Jeffrey Gundlach says it’s “a strange environment [for] a tax cut.”
Discussing the Republican effort during a webinar with investors on Tuesday, he admitted that it also is “tough to opine about a tax plan that has not been finalized.”
However, the timing of the cuts and other moves are odd given the current state of the economy, Gundlach explained, versus that of around 30 years ago “when the economy needed a boost.”
Today, “We are in year eight or nine of an expansion, and [the economy is] picking up … and yet [we’re] cutting taxes,” Gundlach said.
“A tax cut will reduce revenue, and it will grow the deficit and therefore, it will probably grow bond supply, and perhaps boost economic growth,” the fixed income fund manager stated.
“And if it does … it is going to be bond-unfriendly. There’s anticipation of a bit more unfriendly bond environment” in the markets, he explained.
The reforms could also hurt buyers of municipal bonds in some markets, such as New York and California, if state and local income tax deductions are eliminated.
“It’s not really a tax cut at all relative to the buyers of the muni market,” Gundlach said. “For them, it’s really a tax increase.”
Commodity Window
Sharing charts on the low state of commodity prices, he shared: “We’re right at that level where in the past you would have wanted commodities instead of stocks.”
They could benefit from further economic growth and output gains. The global economy is “definitely hanging in there,” Gundlach stated.
“If you ever thought about buying commodities, … maybe you should buy them now,” he said, describing the low level of the S&P Goldman Sachs Commodity Index vs. the high level of the S&P 500.
