Financial markets could reverse the solid momentum in equities at the latest by U.S. President-elect Donald Trump’s Jan. 20, 2017, inauguration, Jeffrey Gundlach, chief executive of DoubleLine Capital, said on Thursday.
The strong U.S. stock market rally, surge in Treasury yields and strength in the U.S. dollar since Trump’s surprising Nov. 8 presidential victory look to be “losing steam,” Gundlach, who oversees more than $106 billion at Los Angeles-based DoubleLine, said in a telephone interview.
“The bar was so low on Trump to the point people were expecting markets will go down 80 percent and global depression – and now this guy is the Wizard of Oz and so expectations are high,” Gundlach said. “There’s no magic here.”
Gundlach had warned last month that federal programs take time to implement, rising mortgage rates and monthly payments are not positive for the “psyche of the middle class and broadly,” and supporters of defeated White House candidate Hillary Clinton are not in a mood to spend money.
“There is going to be a buyer’s remorse period,” Gundlach said. “The dollar is going to go down, yields have peaked and will move sideways, stocks have peaked as well and gold is going to go up in the short term.”
Gundlach, known on Wall Street as the “Bond King,” went “maximum negative” on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32 percent. “I am less defensive now on Treasuries and I am less negative on the 10-year Treasury note at a 2.35 percent yield than we were at 1.35 percent yield,” he said.