DoubleLine's Gundlach Says Fed Shouldn't Raise Rates This Week

The Fed should note developments including global central-bank liquidity reversing from around Oct. 1 and stocks beginning their descent, wrote Druckenmiller, who heads Duquesne Family Office, and Warsh, a visiting fellow in economics at Stanford University’s Hoover Institution.

“We believe the U.S. economy can sustain strong performance next year, but it can ill afford a major policy error, either from the Fed or the rest of the administration,” wrote Druckenmiller and Kevin Warsh, a former member of the Federal Reserve Board.

In other comments, Gundlach said:

• 2019 is a capital preservation year with stocks likely to continue a bear market;
• Best bets are actively managed, high-quality, low-volatility, low-duration bond funds;
• The U.S.-China trade war is likely to get worse, hurting the global economy, as China objects to President Donald Trump’s rhetoric; and
• Exploding U.S. deficits are likely to drive up the cost of borrowing — and Treasury rates — as supply outstrips demand.