DoubleLine Capital CEO Jeffrey Gundlach said he sees another rate hike from the Federal Reserve before the central bank ends its tightening cycle.
“I think one more thing,” Gundlach said Wednesday on the show.End bell: Overtime.” “I think it’s hard to make a ‘continuous increase’ claim with an ‘s’ at the end of the word ‘increase’ and zero unless you have a very large change in economic conditions.”
Fed on Wednesday benchmark interest rate hike rose a quarter percentage point, bringing its target range to 4.5%-4.75%, the highest level since October 2007. The Fed’s statement included language noting that the central bank The central government still finds it necessary to “constantly increase the target range”.
The so-called bond king said Fed Chairman Jerome Powell made a “clarification” statement at Wednesday’s press conference, saying that real yields are positive across the curve. Gundlach said he was referring to Treasury Inflation Protected Securities (TIPS), whose yields have stopped rising.
“He’s looking at the TIPS market, where yields surged last year. That’s a big hit for risky assets in the stock market,” Gundlach said. “They’ve stopped rising and I have a feeling that real yields aren’t going to rise in the first half of the year. So I think that will hold up a bit of the runway.”
Stocks had a strong comeback in January, led by beaten tech names. The S&P 500 up 6.2% in January, marking the best start to the year since 2019. Nasdaq Composite rose 10.7% last month, its best monthly performance since July.
In Powell’s press conference, the head of the Fed said that the central bank could conduct a few more rate hikes to pull inflation down to its target.
“We’ve raised rates by 4.5 percentage points and we’re talking about a few more rate hikes to get to what we think is an appropriate restriction,” Mr. Powell said. “Why do we think that’s probably necessary? We think it’s because inflation is still hot.”
When asked if Gundlach sees the Fed cutting rates this year, he said it’s a coin toss, depending on upcoming inflation data.
“I think they will cut rates in the second half of the year, but I don’t really commit to that idea with certainty,” Gundlach said.
The much-followed investor also said he believes the likelihood of a recession this year has decreased, but remains above 50%.
