Jeffrey Gundlach: Try to Remember

DoubleLine CEO and Chief Investment Officer Jeffrey Gundlach surveys how investors have entered a different world, in its markets, macroeconomics and forecast indicators, than we have experienced in our lifetimes.
Highlights:
(1:08) History of forecasting of the target federal funds rate via market pricing.
(2:23) The rebalancing of the labor market in terms of the labor force versus the supply in the form of job openings.
(5:27) The breakout of the CPI from a 2.8% trajectory that had prevailed from 1983 due to the COVID-19 lockdowns and money printing in 2020-2021.
(8:57) Import and export prices, per Mr. Gundlach, “the most important and legitimate inflation indices, and they are not at all alarming. We see that the import and export prices have been ‘round zero or negative for much of the past two years.”
(11:27) Major economic indicators including the year-over-year change in the Leading Economic Index and consumer confidence expectations (both flashing recession, although GDP remains positive), the U.S. Treasury yield curve, the U.S. unemployment rate versus its three-year moving average.
(15:40) America’s deficit and debt dilemmas, exacerbated by the rise in interest rates, which have increased the federal interest expense as a percentage of federal revenues.
(17:27) Another threatening break from the past: In previous economic cycles, Washington expanded deficit spending to counter recessions, then reduced it during expansions. Today, the government is running very large deficits even amid positive economic growth. The U.S. government “is starting off in a much worse position than any other late-cycle expansion, making the work of the Department of the Government Efficiency even more critical to the mission.”
(19:23) The end of the secular decline in interest rates, the outperformance of the shorter end of the Treasury yield curve versus Treasuries with longer tenors in 2024, and DoubleLine’s active management tactics in anticipation of that development.
(23:07) The “bloodless verdict of the market” across different asset classes, geographies, currencies and commodities.
(26:47) The massive outperformance of U.S. stocks versus ex-U.S. stocks in 2024, and the falling odds of such an outperformance extending into the future.
(33:54) Corporate credit spreads - both investment grade (IG) and below IG at their tightest levels in many years. This, however, is “not really a strong sell signal,” according to Mr. Gundlach, who cites a context of strong corporate balance sheets and the absence of maturity walls.