DoubleLine Capital CEO Jeffrey Gundlach mentioned he sees one further rate hike from the Federal Reserve earlier than the central financial institution ends its tightening cycle.
“I think one more,” Gundlach mentioned Wednesday on CNBC’s “Closing Bell: Overtime.” “I think it’s tough to make the statement ‘ongoing increases’ with an ‘s’ at the end of the word ‘increase’ and do zero unless you had very substantial change in economic conditions.”
The Fed on Wednesday raised its benchmark curiosity rate by 1 / 4 proportion level, taking its goal vary to 4.5%-4.75%, the very best since October 2007. The Fed’s assertion included language noting that the central financial institution nonetheless sees the necessity for “ongoing increases in the target range.”
The so-called bond king mentioned Fed Chairman Jerome Powell had a “clarifying” assertion on the press convention Wednesday, saying the actual yields are constructive throughout the curve. Gundlach mentioned he was referring to the Treasury Inflation-Protected Securities (TIPS), whose yields have stopped their ascent.
“He’s looking at the TIPS market, which had a huge increase in yields last year. That was a major headwind for risk assets in the stock market,” Gundlach mentioned. “They’ve stopped going up and I have a feeling that real yields are going to not go up in the first part of this year. So that keeps a little bit of runway, I think.”
Shares staged an enormous comeback in January, led by beaten-down know-how names. The S&P 500 rallied 6.2% in January, notching its greatest begin of the yr since 2019. The tech-heavy Nasdaq Composite jumped 10.7% final month for its greatest month-to-month efficiency since July.
In Powell’s press convention, the Fed chief mentioned the central financial institution might conduct just a few more rate hikes to deliver inflation all the way down to its goal.
“We’ve raised rates four and a half percentage points, and we’re talking about a couple of more rate hikes to get to that level we think is appropriately restrictive,” Powell mentioned. “Why do we think that’s probably necessary? We think because inflation is still running very hot.”
Requested if Gundlach sees the Fed slicing charges this yr, he mentioned it is a coin flip, relying on the incoming inflation knowledge.
“I kind of think that they’ll cut rates in the second half of the year, but I’m not really committed to that idea firmly at all,” Gundlach mentioned.
The broadly adopted investor additionally mentioned he believes the percentages for a recession this yr have decreased, however they’re nonetheless above 50%.
