Bond king Jeffrey Gundlach says he expects yet another Fed price hike

DoubleLine Capital CEO Jeffrey Gundlach stated he sees one further price hike from the Federal Reserve earlier than the central financial institution ends its tightening cycle.

“I feel yet another,” Gundlach stated Wednesday on CNBC’s “Closing Bell: Extra time.” “I feel it is robust to make the assertion ‘ongoing will increase’ with an ‘s’ on the finish of the phrase ‘enhance’ and do zero until you had very substantial change in financial circumstances.”

The Fed on Wednesday raised its benchmark rate of interest by 1 / 4 share level, taking its goal vary to 4.5%-4.75%, the very best since October 2007. The Fed’s assertion included language noting that the central financial institution nonetheless sees the necessity for “ongoing will increase within the goal vary.”

The so-called bond king stated Fed Chairman Jerome Powell had a “clarifying” assertion on the press convention Wednesday, saying the true yields are constructive throughout the curve. Gundlach stated he was referring to the Treasury Inflation-Protected Securities (TIPS), whose yields have stopped their ascent.

“He is trying on the TIPS market, which had an enormous enhance in yields final yr. That was a significant headwind for danger property within the inventory market,” Gundlach stated. “They’ve stopped going up and I’ve a sense that actual yields are going to not go up within the first a part of this yr. In order that retains a bit of little bit of runway, I feel.”

Shares staged an enormous comeback in January, led by beaten-down expertise names. The S&P 500 rallied 6.2% in January, notching its finest begin of the yr since 2019. The tech-heavy Nasdaq Composite jumped 10.7% final month for its finest month-to-month efficiency since July.

In Powell’s press convention, the Fed chief stated the central financial institution might conduct just a few extra price hikes to carry inflation right down to its goal.

“We have raised charges 4 and a half share factors, and we’re speaking about a few extra price hikes to get to that stage we expect is appropriately restrictive,” Powell stated. “Why do we expect that is in all probability mandatory? We predict as a result of inflation continues to be working highly regarded.”

Requested if Gundlach sees the Fed slicing charges this yr, he stated it is a coin flip, relying on the incoming inflation knowledge.

“I type of suppose that they will reduce charges within the second half of the yr, however I am not likely dedicated to that concept firmly in any respect,” Gundlach stated.

The extensively adopted investor additionally stated he believes the percentages for a recession this yr have decreased, however they’re nonetheless above 50%.