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What Gundlach Thinks about Bond Yields and Rate Hikes

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Part 4
What Gundlach Thinks about Bond Yields and Rate Hikes PART 4 OF 5

Why Gundlach Is Negative on European Sovereign Bonds and Equity

Gundlach on the European bond market

Jeffrey Gundlach shared his view on the European bond market in a recent interview. He said he’s positive on emerging markets (EEM). Among various emerging economies, he’s particularly positive about India (INDA). However, he said that he has a negative stance on European sovereign bonds (VGK) (IEV).

Why Gundlach Is Negative on European Sovereign Bonds and Equity

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Gundlach’s view on emerging markets

The Fed’s rate hike and the stronger dollar (UUP) always hamper the performances of emerging markets (VWO). There’s a negative correlation between emerging markets and the dollar index. However, in the present scenario, despite the rate hike, the dollar index isn’t moving higher. It’s trading within a narrow range of $100–$99. This weaker movement is boosting the performances of emerging markets. Various fundamental factors are also supporting its performance.

Gundlach said that he is more negative on European Sovereign bonds. He is also a little negative on the European stock market. He believes the series of upcoming elections in Europe will create more uncertainty in the political environment. The higher political risk in Europe is dragging down the performances of its sovereign bonds.

In the next part of this series, we’ll analyze why Gundlach advised investors to invest in mortgages.

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