Jeffrey Gundlach is an investor.
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Jeff Gundlach, a billionaire investor, predicted in his latest quarterly webcast that inflation will remain high in 2022, and he compared this year's frenzy around growth stocks to the dot-com bubble.
The boss of DoubleLine Funds warned that if the Federal Reserve starts to reduce its stimulatory policies, financial markets will be rattled and economic growth will suffer.
The quotes were lightly edited andCondensed for clarity.
1. The stock market and risk assets have been supported for over a decade by the Fed's balance-sheet expansion. It's turning into rougher waters for markets as we move into tapering and eventually raising interest rates.
2. It's fascinating to see charts that compare the dot-com era to speculative froth today, like some of the funds that invest in very go-go companies. We have had the same run up as dot-com stocks. The decline of the dot-coms stocks after the dot-com bust has been clearly shown.
3. The Fed has responded to market movements and will continue to defend risk assets. Money printing is here to stay.
4. The US economy is not doing well. It has the appearance of being strong because of the extreme nature of the economy right now.
5. It's likely that we will see economic problems with just a few interest rate hikes from the Fed. Maybe only four or eight hikes, maybe it's 1% or 1.5% on the federal funds rate, that breaks the economy.
6. The bond market seems to be anticipating a weaker economy. The yield curve is flattening so that one should expect economic problems sooner rather than later. We'll start to see trouble in the second half of 2022.
7. I advise investors to keep an eye on the high-yield bond market. It's been a good indicator of risk assets in the coal mine.
8. It's possible that we won't see an inflation reading below 4% in 2022. There is a risk of 7% in the next couple of months. Wage growth and off-the-charts housing inflation are likely to cause elevated inflation next year.
9. My long-term view on the dollar is bearish. We think the dollar will weaken in the second half of next year and possibly in the year of 2023. The US's twin-deficit problem will cause the dollar to go down. The dollar is going to fall to a 12-year-low.
10. When the dollar goes down, you're going to see tremendous outperformance by non-US stocks. When that happens, emerging markets will be very strong performers.
11. When the time is right, emerging markets have been able to beat US stocks. All of the out performance of US stocks in the middle of the 1990s was reversed after the dot-com bust. That could happen again.
12. Gold is boring. It has been stable with all of the inflation and the wild ride in the digital currency. The orphan market for gold and silver is the commodity market. When the dollar goes down, gold will go up, because the dollar has been a cap on gold this year.
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