1. Treasuries & the S&P 500 | “My idea that the S&P would go down on the year would become an extraordinarily strong conviction as the 10-year starts to make an accelerated move above 3%.”
2. U.S. Treasury Market | Chances of the 10-year Treasury yields topping 3% are increasing due to rising U.S. deficits, the Federal Reserve reducing its balance sheet and the Fed raising the benchmark short-term interest rate.
3. Fiscal Deficit | The U.S. deficit could top $1.1 trillion in fiscal 2019 due to tax cuts and growing entitlement expenses: “It’s going to be more like $1.2 or $1.3 trillion.”
4. Inflation | Core inflation is poised to top the Fed’s 2% target, he says. “Core services are up at 2.6%, very significant relative to the Federal Reserve’s goal, and it is trending higher.”
5. The U.S. Dollar | “I am neutral. But the odds are good, though, that the next big move in the dollar is lower,” he said. “It’s a confusing [time]. The long-term chart is at a powerful crossroads.”
7. Bitcoin | "Bitcoin is part of the Rosetta Stone to understand what is happening with the social mood."
6. Gold | “It’s quite possible that gold could go up with yields, if there is a move up in inflation — because inflation is inflationary.”
8. Federal Reserve Tightening vs. Easing | "If QE was a tailwind for markets, then quantitative tightening must be a headwind."
9. Market Correlations | Once the 10-year Treasury yield breached 2.5%, stocks and bonds became positively correlated.
10. S&P 500 | The price-to-sales ratio of the S&P 500 “is at nosebleed levels … [that] we have never seen before.”
11. Stock Sectors | One technology ETF (XLK) is at levels of ’99-’00, and a financial ETF (XLF) is priced like in ’06-’07: “These are bad trade locations.”
Like President Donald Trump, DoubleLine Capital CEO Jeffrey Gundlach actively shares his views on Twitter. His focus is on the equity and bond markets, though he doesn’t shy away from expressing his thoughts on political figures.
On Friday, he tweeted: “Markets are at an important crossroads. VIX closed below ’17 high today, a first since early Feb breakout. [Is the volatility] genie back in the bottle? I’m skeptical.”
Two weeks earlier, he commented on Treasury Secretary Steven Mnuchin’s remark that Trump’s policies will raise wages without inflation. “Yeah, sure. And we are going to expand the Buffalo Art Museum without making it bigger,” Gundlach tweeted.
On Tuesday’s DoubleLine webcast, entitled “Inflation Is Inflationary,” the fixed income specialist discussed everything from the state of the U.S. housing market to Bitcoin.
His main focus, though, was on where the stock and bond markets appear to be heading based on historic trends and recent data.
Check out the gallery above for Gundlach’s latest analysis and discussion.
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