Gundlach says S&P 500 will post negative return in 2018

Famed DoubleLine bond manager says commodities may be one of the best investments this year

Jan 10, 2018 @ 11:29 am

By Bloomberg News

Jeffrey Gundlach, the billionaire bond manager, says the S&P 500 Index will end the year with a negative return and is dubious of the long-term value of bitcoin.

"All recession indicators are flashing no recession, which means it's priced in," Mr. Gundlach said Tuesday during his annual "Just Markets" webcast, in which he gives his outlook for the coming year. "This is why I say S&P 500 down after a pretty decent run early in 2018."

The money manager said he doesn't own bitcoin. The value of digital currencies surged last year, with everyone from regulators to top bank executives taking note.

"People think it is safe," said Mr. Gundlach, 58, chief investment officer at Los Angeles-based DoubleLine Capital, which oversaw assets of about $119 billion at year-end. "I have the feeling it is just the opposite."

Speaking about the asset in the webcast, Mr. Gundlach pointed to comments he made last month that bitcoin shorts would make money at the level they were trading at the time.

(Take Five: Matt Hougan, Inside ETFs CEO, predicts another record year for inflows)

The DoubleLine Total Return Bond Fund, his biggest fund, returned 3.8% last year, better than 80% of its peers, according to data compiled by Bloomberg. The fund mostly focuses on mortgages.

Mr. Gundlach also said during the webcast that commodities may be one of the best investments this year.

A year ago, Mr. Gundlach said:

— 10-year Treasuries would "almost for sure" approach 3%, a level that would signal an end to the multi-decade bond bull market. The 10-year peaked at 2.6258 in March and climbed back above 2.5% on Tuesday.

— The Federal Reserve would raise rates two or three times in 2017 and needed to be "less relaxed" because of the rising risk of inflation. The Fed lifted rates three times, while consumer price inflation has been running at about 2%.

— Investors should diversify their equity holdings beyond the U.S. to countries such as India and Japan. In dollar terms, Japan's Topix returned 27% and India's NSE Nifty 50 Index surged 39%, compared with a 22% gain for the S&P 500.

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