Bond king Jeffrey Gundlach has tipped the US dollar to move lower, adding that a strong dollar ultimately ‘could be negative for the US.’
In a Tuesday webcast, the chief executive and chief investment officer of DoubleLine Capital said that he did not think the dollar would reach new highs without first moving downward.
'I don’t think we will have new highs in the dollar without first seeing new moves to the downside,’ said Gundlach. ‘We will probably end with the dollar lower at year-end than it is right now.’
The manager said that the dollar’s speculative positioning is ‘out of whack’ on the long side partly because he thinks the president wants a weaker dollar.
In July, President Donald Trump said in a CNBC interview that he was not ‘thrilled about’ the Federal Reserve’s rate increases, which he later said via Twitter is contributing to a stronger dollar that in turn is taking away the competitive advantage of the US.
Gundlach, who had predicted that the dollar would rally in previous DoubleLine webcasts, said a lower dollar would provide a relief for non-US stocks and particularly emerging market stocks, which have struggled over the past few months mainly due to the strengthening of the US dollar and escalating trade tensions around the world.
The portfolio manager also suggested that equities investors should not be scared of emerging markets. He added that it is better to diversify into international stocks than buy the S&P 500 index right now.
‘If it gets worse in EM, then it has to be a global situation. If you are going to own stocks, I would certainly be internationally diversified,’ he said.
Gundlach also debunked president Trump’s rhetoric that jobs and wages are booming under his administration. The manager studied nonfarm payrolls for the last 20 months under president Trump and those under former president Barack Obama and found that the figures under Trump are ‘slightly worse.’
'If this is such an economic boom, then how come nonfarm payroll is slowing down.’ said Gundlach.
In a Q&A session following the presentation, the manager implied that DoubleLine has a pipeline of product launches to come and is open to launching target date funds in the future.
Launched in 2010, the fund has returned 6.8% over the past three years until the end of August, compared to its benchmark, the Bloomberg Barclays US Aggregate index, which has returned 1.49% over the past three years until the end of July.
Los Angeles, Calif.-based DoubleLine Capital managed $120 billion as of June 30.