This weekend’s Barrons has an excellent interview with Jeff Gundlach of DoubleLine. I’ve spent quite a bit of time discussing Gundlach and his performance, because quite frankly, there is no one better in the bond space than Gundlach. His performance over the entirety of his career is simply incredible.
As the article cites, Gundlach’s outlook for bonds is likely the most credible, however, I was floored by his comment that the S&P 500 is going to 500. Gundlach may not be an equity guru, but he’s no lightweight when it comes to understanding the macroeconomy (via Barrons):
Gundlach rarely is shy about offering his opinion on markets. Like most bond honchos, including Gross, a member of the Barron’s Roundtable, he seldom likes stocks, which are, after all, bonds’ primary rival for investment dollars. “Though I rarely go public with specifics on stocks, I think the Standard & Poor’s 500, which is now over 1300, will hit 500 in the next couple of years,” he says. “I usually couch my belief by saying merely that 2011 will be a tough year for equities.”
Nor has he made a secret of his bearish views on the U.S. economy and the seemingly inexorable rise in government debt. But he sees little chance in the near term of a surge in inflation that would send Treasury-bond yields soaring. A jump in the yield on 10-year bonds to a range of 4% to 4.5% from a current 3.6% would cause economic growth to short-circuit, he says.
By the same token, a renewed slowdown in the economy would drive 10-year bond yields sharply lower, but not below 3%, unless a banking panic similar to last year’s euro-zone crisis ensues. As for the U.S. housing market, Gundlach expects home prices to fall by another 10% to 15%.
Read Some Related Articles
All-Time Highs in the Stock Market are Perfectly Normal
“If you think the market’s “too high” wait ’til you see it 20 years from now.” – Nick Murray ...read more
AI, Robotics, and the Future of Jobs
This is a good piece sent courtesy of John Mauldin. It goes well with this video which is a pretty scary perspective of what the robots could do ...read more
Citi: Beware Rising HY Spreads
Worried about a potential recession and another big market decline? Analysts at Citi say a good way to track this risk is to look at the HY bond spreads. Specifically, ...read more
What Backs the Value of Money?
I was reading this very good piece by Matthew Klein at FT Alphaville when I came across this line: "The only kinds of money that reliably hold their value are the ...read more