Jeffrey Gundlach, the billionaire bond manager, says the S&P 500 Index will end the year with a negative return and is dubious of the long-term value of Bitcoin.
“All recession indicators are flashing no recession, which means it’s priced in,” Gundlach said Tuesday during his annual “Just Markets” webcast, in which he gives his outlook for the coming year. “This is why I say S&P 500 down after a pretty decent run early in 2018.”
The money manager said he doesn’t own Bitcoin. The value of digital currencies surged last year, with everyone from regulators to top bank executives taking note.
“People think it is safe,” said Gundlach, 58, chief investment officer at Los Angeles-based DoubleLine Capital, which oversaw assets of about $119 billion at year-end. “I have the feeling it is just the opposite.”
Speaking about the asset in the webcast, Gundlach pointed to comments he made last month that Bitcoin shorts would make money at the level they were trading at the time.
The DoubleLine Total Return Bond Fund, his biggest fund, returned 3.8% last year, better than 80% of its peers, according to data compiled by Bloomberg. The fund mostly focuses on mortgages.
A year ago, Gundlach said 10-year Treasuries would “almost for sure” approach 3%, a level that would signal an end to the multi-decade bond bull market.
Time for Commodities?
Gundlach also said during the webcast that commodities may be one of the best investments this year as they surge during the late phase of the economic cycle.
“I think commodities will outperform in 2018,” Gundlach said. “Commodities always rally sharply — much more sharply than they have so far — late in the business cycle as we lead into a recession.”
Gundlach presented a chart that showed the correlation between recessions and commodity prices, which tend to rise late in economic cycles dating back to the 1970s.
“In front of each one, commodities rallied a huge amount,” said Gundlach, chief investment officer at Los Angeles-based DoubleLine Capital LP, which oversaw assets of about $119 billion at year-end. Investors shouldn’t buy specific commodities, but rather a broad basket, he said.
His thoughts on commodities echo Goldman Sachs Group Inc., which last month said raw materials will bring better returns than other assets in the long run on strong global demand, and reiterated its 12-month overweight recommendation.
The Bloomberg Commodity Index of 22 raw materials has climbed about 11% since the second half of June.
Crude oil is trading at the highest in more than three years as the Organization of Petroleum Exporting Countries and its allies trim supply to drain a global glut.
Prices of industrial metals including aluminum, zinc and copper have soared on the back of supply constraints and sustained demand. Spot palladium is set to break a record as it trades near prices last seen in 2001.
Citigroup Inc. has flagged some wild cards for 2018 which could have “significant consequences” for commodities.
Among uncertainties highlighted were potential wars, Middle East tensions, and risks associated with the actions of U.S. President Donald Trump and North Korea’s Kim Jong Un.