No repeat for stocks this year, Gundlach says

Betting against Treasuries risky, caution needed with funds buying junk bonds, shorting government debt

Jan 15, 2014 @ 9:20 am (Updated 2:44 pm) EST

jeffrey gundlach, bonds, bond funds, junk bonds, stocks, S&P 500, outlook, 2014
Bloomberg News

The U.S. stock market won't repeat last year's 32% return in 2014, according to DoubleLine Capital's Jeffrey Gundlach.

Should bond buying by the Federal Reserve be reduced, it makes sense that its support of the stock market would be taken away, Mr. Gundlach said Tuesday on a conference call with investors. The S&P 500 rose 1.1% to 1,838.88 Tuesday, posting its biggest gain of the year.

The Fed will probably end its monthly asset purchases by the end of this year while keeping short-term interest rates low into 2016, said Mr. Gundlach, whose firm had about $52 billion in assets as of Sept. 30. Long-term bonds won't do “that badly” on a yield basis even as they fall out of favor, he said.

Investors should keep in mind that betting against U.S. Treasuries could backfire if there's any economic weakness. They also should be cautious with funds that have been buying junk bonds and shorting government debt, according to Mr. Gundlach. He said Treasuries look cheap relative to municipal bonds and high-yield securities, or those rated below Baa3 by Moody's Investors Service and less than BBB- by S&P. For those who can stomach the volatility, Puerto Rico and J.C. Penney Co. bonds may be worthwhile, Mr. Gundlach said.

Mr. Gundlach's $31 billion DoubleLine Total Return Bond Fund (DBLTX) lost $6 billion to redemptions last year, according to estimates by Morningstar Inc. It returning 0.02%, ahead of 80% of peers, according to data compiled by Bloomberg. All of the money put into U.S. bond mutual funds in 2012 is likely to be pulled by the end of this year after withdrawals started in 2013, said Mr. Gundlach.

(Bloomberg News)

  @IN Wire

Apr 19 08:33AM
Saturday links: systems vs. goals http://t.co/Egsa4BQhko
Apr 19 07:23AM
10 Weekend Reads http://t.co/5d1xCHafog

Career Center

Explore your opportunities and be informed for your next move.

Company Type
Firm Type
Clearing Firm
Presented by

Most Watched Video

7:12The 2 biggest factors driving growth in active ETFs

Ugo W. Egbunike Dir. Of Business Development, ETF.com Greg Crawford Deputy Editor, InvestmentNews

Video Spotlight
1:47People are Living Longer. Good News or Bad News?

Sponsored by Oppenheimer Funds Inc.