“DoubleLine Capital CEO Jeff Gundlach told Bloomberg Television’s Erik Schatzker and Stephanie Ruhle on “Market Makers” today that “investors should be holding cash” in this environment. See the full video here.
Gundlach said that risk assets have “diminishing returns” on each round of QE and “it’s almost like a half-life of a radioactive particle.” Investors shouldn’t turn to risky assets as a “Pavlovian response.” Gundlach also said that, “I don’t see a lot of value in the U.S. stock market and I think you have to play it safe in the U.S. bond market.”
Gundlach on how to invest in this environment:
“One thing is clear that this is the beginning of an attempt to bring the fiscal deficit under control or at least start to address it. When you raise taxes and when you cut spending, whatever the combination is going to be, you will have headwinds for the economy. The economy is really being supported–this isn’t just in the United States, it’s in Japan, the ECB and Britain–the economy is being supported by quantitative easing that is allowing for a massive budget deficit and money printing exercises to go on…As you address the fiscal problems, you are going to have weak economic growth. What that means is that you are in an environment that is going to have further trouble in terms of investment returns that are in areas that are based on economic growth and areas that do relatively well like bonds…Broadly speaking, I think that investors should be looking for lower prices on most risk assets in these developed countries with the exception of Japan…Investors should be looking for the potential inflationary consequences of all this money printing exercise and the place to look for that is Japan…”
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