The economy and financial markets have entered a new secular environment that challenges previous wisdom on items such as traditional recession indicators, Doubleline CEO and Chief Investment Officer Jeffrey Gundlach said Tuesday.
Using as metaphor a modern George Segal sculpture, “Man Leaving a Bus,” the billionaire investor and avid art collector suggested markets are “leaving the bus” in various ways.
“A lot of the things that we thought we knew, and I talked about this in past webcasts, may have been informed by a secular environment that has changed,” he said on a webcast.
Secular declining interest rates, for example, appear to have been replaced with secular rising interest rates, at least one the long end, Gundlach said. “Some of the traditional recession indicators don't work, haven't been working because they've worked during a different secular regime.”
One change is that central banks have been supporting gold prices by buying substantial amounts for several years, he said. “I think gold is being treated as safety by people. Certainly I feel that way. Safety from this bus that we've left, not knowing exactly what sort of an environment that we're headed into.”
More broadly, Gundlach notes he’s been talking about change and transition for a long time, what he calls the “fourth turning,” based on a book title, which describes a societal upheaval. “I feel like we’re leaving the bus right here in the fourth turning.”
The California wildfires, he said, “are much more significant than people realize. The concept of rebuilding is not even a concept yet. People talk about the process of rebuilding. There is no process. There is nothing organized. Nobody's in charge. Nobody prepared for this.”
Gundlach appeared to criticize government policies and response to the Los Angeles fires.
California Gov. Gavin Newsom has said California's good at rebuilding, Gundlach said.
“They should be better at not needing rebuilding. And I think the whole society in Southern California is feeling that way, including a lot of people who were very supportive of many of the policies that at least in part contributed to the potential for these fires. A lot of these people that were gung-ho for these policies are suddenly gung-ho against them. And it would be interesting to see if that has legs,” he said, without going into detail.
Gundlach said he’s in a fire evacuation zone and has had fire on the property but not at his house.
“We've proved to be sufficient, but there is very, very little support in spite of all the taxes that get paid to the county on property tax, to the state, on income tax there. When the fires came last week, there was literally no support whatsoever from anyone in the Palisades.”
Click through the gallery for eight stock and bond market predictions that Gundlach offered during the webcast.
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