(MarketWatch) - The direction is pointing south for stocks on Thursday.
And some big names in finance have been offering advice over the past 24 hours. Howard Marks, co-founder and co-chairman of Oaktree Capital, on Wednesday warned investors to be cautious as uncertainty under President Donald Trump isn’t going away.
There’s plenty of wariness in our call of the day from another influential investor, DoubleLine’s Chief Executive and Chief Investment Officer Jeffrey Gundlach. He has lots of ideas on where investors should be as U.S. market uncertainty swirls.
Gundlach noted that markets are behaving “strange” and “differently,” in an interview with Bloomberg late Wednesday, where he noted how the dollar index DXY and Treasury yields fell during the April stock pullback, the opposite of what was seen in S&P 500 SPX corrections in the past 15 years.
“I think what we have is a recognition that the interest expense for the United States is untenable, if we continue running a $2 trillion budget deficit and we continue to have sticky interest rates,” he said.
“There’s an awareness now that the long-term Treasury bond is not a legitimate flight-to-quality asset. It’s not responding to lower interest rates, it’s not really responding to an inflation rate, which is now 2.5%,” and likely to go higher, he said.
The manager, nicknamed the bond king, said they are “very uninvolved in the long-term [30-year] Treasury bond,” because of his belief yields will rise when the U.S. economy starts to weaken or the Fed cuts.
“I think what we have is a recognition that the interest expense for the United States is untenable, if we continue running a $2 trillion budget deficit and we continue to have sticky interest rates,” he said.
“There’s an awareness now that the long-term Treasury bond is not a legitimate flight-to-quality asset. It’s not responding to lower interest rates, it’s not really responding to an inflation rate, which is now 2.5%,” and likely to go higher, he said.
The manager, nicknamed the bond king, said they are “very uninvolved in the long-term [30-year] Treasury bond,” because of his belief yields will rise when the U.S. economy starts to weaken or the Fed cuts.
What is he expecting? “I anticipate a great buying opportunity. I don’t know when it’s going to happen, but it’s getting close,” he said. “The environment feels a lot like 1999 relative to AI is just map over dot-com. I also think it feels a lot like 2006, 2007.”
“One of the hardest things to do in the investment business is to learn and fully appreciate how long everything takes to happen. It takes forever for the problems to actually show up, it takes forever for the defaults to finally arrive, but people anticipate change with great enthusiasm,” such as what’s been seen with AI, he said.
Tech stocks that have been outperforming tied to AI are a “momentum trade,” which always tends to overshoot on the upside. “And then once the momentum’s broken, the late comers decide that their first loss is their best loss and it turns into a seller’s market,” he said.
Gundlach said a smart investor will right now be putting money into “long-term themes. And a theme that I think is one of the most bankable, and it might take 30 years, is that you should invest in India because it has a similar profile to where China was 35 years ago,” such as a massive population and labor force and is now an economic powerhouse.
Buy India and hold for “your grandchildren’s college fund,” and then just try to forget it, he said.
By Barbara Kollmeyer
