Jeffrey Gundlach, the chief investment officer of Los Angeles-based DoubleLine Capital, used the Sohn Conference in New York to tout the SPDR S&P Oil & Gas Exploration & Production ETF and to recommend shorting Facebook Inc. as a relative-value trade.
“Some people think inflation should not rise going into a recession, but actually the opposite is true,” Gundlach said. “One should expect that as the next recession approaches, commodities should have a big gain.”
As Facebook comes under growing scrutiny, there’s been increasing talk of regulating social media companies. Equity bubbles are often popped by regulation, according to the fund manager, who is also chief executive officer at DoubleLine. The Los Angeles-based firm oversaw about $119 billion as of March 31.
“There’s good and bad going on in the world,” Gundlach said in discussing social media and Facebook CEO Mark Zuckerberg’s apology over the recent controversy surrounding users’ personal data. “Interpretations matter.”
Gundlach has been touting commodities as one of his favorite investments this year, because they historically rally late in economic cycles. He recommended against using leverage for the latest paired trade, which he called fairly risky.
At last year’s Sohn conference, Gundlach proposed a paired trade going long on the iShares MSCI Emerging Markets exchange-traded fund while shorting the SPDR S&P 500 ETF with one turn of leverage. The bet would have produced a gain of about 13 percent through April 20, not including costs.
Gundlach reiterated on March 13 that he expects the S&P 500 Index to fall this year, especially if yields on 10-year U.S. Treasury bonds move above 3 percent. Yields on the 10-year reached 2.96 percent on April 20, the highest since January 2014, and rose again today.
The money manager has warned that U.S. yields are likely to climb as deficits increase and the Federal Reserve reduces its balance sheet. German rates also may rise as economic growth continues and the European Central Bank dials back its monetary-easing policies.
While DoubleLine is predominantly a fixed-income investing firm, Gundlach also runs other funds that hold diverse assets.
— Check out Gundlach’s 11 Takeaways on Yields, Markets & Madness on ThinkAdvisor.