Why Jeffrey Gundlach Believes in a Market Correction This Summer
Jeffrey Gundlach on market movement
DoubleLine’s Jeffrey Gundlach is well known for his predictions for the market (SPY) (SPX-INDEX). Last year at the 2016 Sohn Investment Conference, he correctly predicted that chances were great that Donald Trump would win the US presidential election.
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On Wednesday, May 3, 2017, Gundlach said during a webcast that he believes the market (QQQ) will correct this summer. His views came after the market closed on Tuesday, May 2. He believes US stocks (COMP-INDEX) (IWM) could fall this summer.
Gundlach also said the market correction will coincide with the Federal Reserve’s rate hike. Earlier, in December 2015, when the Fed raised its key interest rate for the first time in a decade, we saw a drastic fall in the major indexes at the start of 2016. The fall continued until mid-February 2016. Since then, the index is expected to fall more than 10.0% to evidence a market correction.
Gundlach believes that in the present situation, the S&P 500 Index hasn’t fallen more than 10.0% from its recent high. The index has shown a strong movement since the US election. However, in March 2017, we saw some pullback in the index with it falling nearly 1.4% that month. President Trump’s efforts to replace the Affordable Care Act are failing so far, which has weighed on the index.
Gundlach also said that the strong movement we saw in major US indexes is mainly driven by strong economic fundamentals. The improvement in major economic indicators is improving investor confidence in the US economy (DIA). He also clarified that he doesn’t believe the US economy could be headed for a recession.
Oil, gold, and Treasury yields
Gundlach also believes that the ten-year Treasury yield (TLT) could move higher this summer. He also believes oil prices (USO) could move lower as extraction technology improves. As for gold prices (GLD) (GDX), he believes they could face “another leg up.”
Be sure to read Mario Gabelli: Market Has ‘No Margin of Safety’ for more information.