Deficit Plus Fed Policy Are "Suicide," Gundlach Says

With yesterday's rate hike from the central bank all but baked in, the excitement came from dot-plot projections or the Q&A session with Chairman Jerome Powell, which was a doozy. Markets were happy to wait it out, still snoozing after proclamations of peace with North Korea failed to move the needle.

So on to our call of the day, which comes from DoubleLine founder Jeff Gundlach, who has a dire warning on the U.S. fiscal situation.

“Here we are doing something that almost seems like a suicide mission,” he said in a fresh webcast about his DoubleLine Total Return Bond Fund. “We are increasing the the size of the deficit while we’re raising interest rates.”

“It’s pretty much unprecedented that we’re seeing this level debt expansion so late in an economic cycle,” Gundlach reportedly said, noting that both Fed fund-rates and the debt-to-GDP level are rising.

Still, the anonymous blogger behind the Heisenberg Report urges investors not to get too worked up over it. The problem, says the blogger, is that Gundlach is merely repeating what others have been warning and warning about.

As for the rest of the “Bond King’s” views on that webcast: The dollar is going down, oil is headed for $80 to $90 a barrel, and now’s a good time for emerging-market or high-yield bonds.

 

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