Late To Be Buying 'Trump Trade' As Market Momentum Wanes, Says Gundlach

Dec 1 2016 | 8:14pm ET

By Jennifer Ablan (Reuters) - Financial markets could reverse their solid momentum at the latest by U.S. President-elect Donald Trump's Jan. 20 inauguration, DoubleLine Capital Chief Executive Jeffrey Gundlach 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 the Los Angeles-based investment management firm, 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," said Gundlach, who voted for Trump and accurately predicted in January the winner of the presidential election.

"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. "Bank of America's dividend yield is 1.39 percent while the 3-year Treasury yield is 1.45 percent. I mean, really?"

Gundlach, soon after Trump's presidential victory, told investors to avoid exposure to so-called "FANG" stocks, an acronym that refers to Facebook, Amazon, Netflix and Google parent Alphabet. He remains bearish on the group.

"People want something real," Gundlach said. "No more on this 'man behind the curtain' stuff. Industrials, materials ... people are tired of tweets. They want cement."

Overall, Gundlach said: "It is so late to be buying the Trump Trade."


In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...