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Jeffrey Gundlach Thinks Investors Should Be Defensive

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Nov. 20 2020, Updated 4:41 p.m. ET

Jeffrey Gundlach: An interview with CNBC

On Monday, October 17, 2016, in an interview with CNBC’s Fast Money Halftime Report, Jeffrey Gundlach, billionaire investor and founder and CEO of DoubleLine Capital, discussed his views on the following:

  • market (SPY) (QQQ) outlook
  • key technical levels of the S&P 500 index
  • the US Presidential election and chances of fiscal stimulus
  • the Fed’s rate hike decision
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Jeffrey Gundlach’s view on the market

When Gundlach discussed his current stance on the market (VFINX) (QQQ) in the interview, he said that there are more uncertainties lying in the market. He particularly advised investors to take a position in defensive stocks. He also said that his firm is shorting the consumer discretionary sector (XLY) (VCR) (RXI).

The defensive sector has little correlation with the business cycle, so it is known as a non-cyclical sector. The defensive sector includes utilities, healthcare, and telecommunications. The Utilities Select Sector SPDR ETF (XLU), the Health Care Select Sector SPDR ETF (XLV), and the Vanguard Telecommunication Services ETF (VOX) have exposure to defensive stocks.

In August 2016, billionaire investor Bill Miller said the opposite of what Jeffrey Gundlach is saying. He said that he is avoiding the defensive sector, as it looks overpriced. He is investing in the cyclical sector in this current investment scenario and is expecting that it will provide a good return in the next business cycle.

When the business cycle starts to recover, we see expansion in economic activity. Corporate earnings also pick up at that time, and fund managers shift their investment towards the cyclical sector. But Gundlach’s advice to invest in the defensive sector and shorting the consumer discretionary sector indicates that he isn’t optimistic about the recovery of the US business cycle.

In a previous article, we also saw that Carl Icahn said he is very concerned about the stock market. Many fund managers and billionaire investors are advising caution.

In the next part of this series, we’ll analyze the technical level of the S&P 500 Index.

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