Jeffrey Gundlach: The Fed shouldn’t raise interest rates
Talking to CNBC, “bond king” and DoubleLine CEO Jeffrey Gundlach said of the Federal Reserve, “I think they shouldn’t raise [rates] this week. The bond market is basically saying, ‘Fed, you’ve got no way you should be raising interest rates.’”
Gundlach added that the Fed has shouldn’t have kept rates (AGG) so low for this long. As we highlighted in What Will the Fed’s December Meeting Mean for Markets?, the Fed is widely expected to raise the interest rates (BND) by 25 basis points at its December 18–19 meeting. The Fed has already raised interest rates three times this year and eight times since it started raising rates in December 2015. It began its quantitative easing process after the Great Recession ended to encourage more borrowing and boost the economy.
The Fed’s rate hike trajectory
At its meeting in September, the Fed raised rates by 25 basis points and hinted at a rate hike in December. The situation since then, however, has changed quite dramatically. After hitting its yearly peak on September 21, the S&P 500 (SPY) has fallen 11% and is currently trading in the red at -2.4% year-to-date. The Dow Jones Industrial Average (DIA) is also in the red for the year.
Jeffrey Gundlach: Beginnings of a bear market?
Gundlach also said, “I’m pretty sure this is a bear market.” He expects the S&P 500 to fall below the lows it hit early in 2018. He believes that even the FAANGs—Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL)—are currently in or near the bear market, which was the “last straw.”
During an investor webcast on December 11, Gundlach painted quite a bearish picture of stocks, bonds, and the US economy (SPY)(DIA). As CNBC reported, he commented, “It certainly looks like the U.S. [stock market] is going to break down to me and to a lower level.”