Why Billionaire Jeffrey Gundlach Is Buying S&P 500 Puts

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Why Billionaire Jeffrey Gundlach Is Buying S&P 500 Puts PART 3 OF 4

Gundlach Weighs In on President Trump

Gundlach on President Donald Trump

Billionaire Jeffrey Gundlach correctly predicted Donald Trump’s win in the US presidential election of 2016. He also said at that time that Trump’ win could lead to huge fiscal stimulus . Trump is very comfortable with debt and, during his presidency, the United States (VFINX) might experience a large fiscal deficit.

Gundlach Weighs In on President Trump

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Since the US election on November 8, 2016, the S&P 500 index has returned nearly 15.6% as of August 9, 2017. It was a huge achievement for the S&P 500 index (SPY)(IWM). Gundlach said in the interview that Donald Trump will receive “very little” credit for the market movement. As many promised reforms—such as tax reform, healthcare restructures, and higher fiscal stimulus—are losing their shines, investors are gradually losing their confidence about the expected reforms.

Gundlach said, “The current president is getting virtually nothing done. He’s very noisy about it. The nothing getting done is the consistent theme, the market’s been going up with nothing getting done. So I don’t think the president’s performance has much to do with where the stock market valuation is today.”

Gundlach Weighs In on President Trump

Economic environment

Gundlach is still concerned about the economic environment. In the last six months, the US economy added an average of 2,00,000 jobs per month. According to Gundlach, the US economy already seen far more than this job growth in the past decades. On the other side, wage growth needs to pick up.

However, consumer sentiment is gradually rising, which is a very positive sign for the economy. Investors and businesses are optimistic about the long-term economic outlook of the United States (VOO). This sentiment is driving the market rally. However, in the short term, the delay in these reforms could hamper the movement of the S&P 500 index.

In the next part of this series, we’ll analyze Gundlach’s view on the bond yield.


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