DoubleLine Capital CEO Jeffrey Gundlach delivered his thoughts on the markets and more Tuesday, just as the presumptive Democratic candidate for president, Joe Biden, revealed his partner on the ticket.
Asked during the webcast whether Biden would win the November election, Gundlach didn’t hesitate: “I don’t think so. I’d bet against that.”
In 2016, Gundlach also was bullish on Trump.
“I think polls are very, very squishy right now, because of the highly toxic political environment in which we live,” he said.
A large number of conservatives reportedly “have lied about their support for Donald Trump, either directly or by omission, which kind of says that maybe people aren’t really getting the right read from polls.”
Gundlach added, “One thing about Joe Biden is he can’t seem to get above 50%.”
A Monmouth University poll released Tuesday found 51% of voters supported Biden, while 41% supported Trump. The survey also found 4% of voters support third-party candidates and 4% are undecided.
“I just think that there’s a lot … of time here [before Nov. 3], and there’s going to be a lot of twists and turns,” the DoubleLine executive said — including some for the markets.
“I expect significant market volatility, which is usually the case in and around a presidential election,” he said. “I think that this go-round, I would expect to see much, much greater volatility.”
Specifically, concerns about “progressive policies, the so-called tremendous increase of deficit spending for basically wealth manipulation [mean] that [things] could get pretty heated,” Gundlach said.
As for Biden’s pick of Kamala Harris as his running mate, “I don’t think it’s a good pick. I think she’s a little too charismatic … a little bit dominant with her personality.”
He added, “I’m not surprised that she’s the pick. I mean, he certainly promised to pick a woman. And it seemed quite obvious that it would be a person of color and apparently he’s fulfilled that. We’ll see how they find a way of working together.”
“Most markets right now are at a reversal stage. I’m not surprised to see gold drop $100-plus [an ounce] today,” Gundlach said.
Turning to fixed income, he said yields “have started to drift higher at the long end.”
Gundlach is “not interested in long-term Treasury bonds at all” or “short-term Treasury bonds really at all,” because of the size of the U.S. budget deficit.
The 12-month deficit was $3 trillion as of June 30. The Congressional Budget Office has projected that the annual deficit could hit $3.7 trillion for the fiscal year ending Sept. 30.
Total federal debt held by the public was $19 trillion as of May 30, with intra-governmental holdings at nearly $6 trillion. That puts the total national debt at some $25 trillion. U.S. GDP was $21 trillion in 2019.
This budget growth “is getting almost surreal in terms of what’s happening,” Gundlach said.
“Gold will ultimately go much higher because … the dollar is going to go much lower [over time],” he explained, connecting the currency’s long-term movement to national debt.
“But I think the dollar’s decline is probably nearly over [in the short term], and therefore gold’s [high is over, too,] for the time being,” Gundlach said.
Most markets today “have kind of lost some of their momentum off the recent moves,” he added. “So gold has hit short-term ‘highish.’ I mean, it could always retest it, but it’s made a very big move up [of] more than 50% in two years.”
“Interest rates look like they’re rising gradualistically until such time as the [Federal Reserve] institutes yield curve control, whatever that might be,” according to Gundlach. “And it’s talked about a lot.”
Back in March or April, he added, “there was [talk about the Fed] just going to have a zero interest rate policy.”
In his view, interest rates should “stay near zero, certainly for quarters to come — if not years.”
The Stock Rally?
The “risk rally” that started off of the March lows is “probably getting long in the tooth,” Gundlach said.
“I’m looking for a lot of short-term reversals as the general theme for the markets, and that goes for gold, as well,” he explained.
What to Do?
People often ask him about what investment strategy to follow given so much uncertainty. “I say, ‘You should really probably break your assets into three pieces,’” Gundlach said.
First, “hold cash significantly against the potential for deflation,” he said.
Second, “own gold or something like that for the long term, because that’s something that’s got real asset value and will help you for inflation,” the DoubleLine CEO stated.
Third, “own some stocks, because even though I’m not positive on stocks, I’ve realized that it’s possible that we go into a inflationary situation where at least stocks [have] the possibility of adding a zero to their [price],” he explained. “You’re … not going to be able to do that with [many other] asset classes.”
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