This weekend’s Barrons has an excellent interview with Jeff Gundlach of DoubleLine. I’ve spent quite a bit of time discussing Gundlach and his performance, because quite frankly, there is no one better in the bond space than Gundlach. His performance over the entirety of his career is simply incredible.
As the article cites, Gundlach’s outlook for bonds is likely the most credible, however, I was floored by his comment that the S&P 500 is going to 500. Gundlach may not be an equity guru, but he’s no lightweight when it comes to understanding the macroeconomy (via Barrons):
Gundlach rarely is shy about offering his opinion on markets. Like most bond honchos, including Gross, a member of the Barron’s Roundtable, he seldom likes stocks, which are, after all, bonds’ primary rival for investment dollars. “Though I rarely go public with specifics on stocks, I think the Standard & Poor’s 500, which is now over 1300, will hit 500 in the next couple of years,” he says. “I usually couch my belief by saying merely that 2011 will be a tough year for equities.”
Nor has he made a secret of his bearish views on the U.S. economy and the seemingly inexorable rise in government debt. But he sees little chance in the near term of a surge in inflation that would send Treasury-bond yields soaring. A jump in the yield on 10-year bonds to a range of 4% to 4.5% from a current 3.6% would cause economic growth to short-circuit, he says.
By the same token, a renewed slowdown in the economy would drive 10-year bond yields sharply lower, but not below 3%, unless a banking panic similar to last year’s euro-zone crisis ensues. As for the U.S. housing market, Gundlach expects home prices to fall by another 10% to 15%.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.