U.S. Markets open in 3 hrs 4 mins

GUNDLACH: 'It's a different world when the Fed is raising interest rates'

Myles Udland
jeff gundlach

(REUTERS/Eduardo Munoz)
Jeffrey Gundlach, CEO and CIO of DoubleLine Capital.

Jeffrey Gundlach, CEO and CIO of DoubleLine Funds, has a simple warning for the young money managers who haven't yet been through a rate-hike cycle from the Federal Reserve: It's a new world.

In his latest webcast updating investors on his DoubleLine Total Return bond fund on Tuesday night, Gundlach, the so-called Bond King, said that he's seen surveys indicating two-thirds of money managers now haven't been through a rate-hiking cycle.

And these folks are in for a surprise.

"I'm sure many people on the call have never seen the Fed raise rates," Gundlach said. "And I've got a simple message for you: It's a different world when the Fed is raising interest rates. Everybody needs to unwind trades at the same time, and it is a completely different environment for the market."

Currently, markets widely expect the Fed will raise rates when it announces its latest policy decision on Wednesday. The Fed has had rates pegged near 0% since December 2008, and hasn't actually raised rates since June 2006.

According to data from Bloomberg cited by Gundlach on Tuesday, markets are pricing in about an 80% chance the Fed raises rates on Wednesday. Gundlach added that at least one survey he saw recently had 100% of economists calling for a Fed rate hike.

The overall tone of Gundlach's call indicated that while he believes it's likely the Fed does pull the trigger, the "all clear" the Fed seems to think it has from markets and the economy to begin tightening financial conditions is not, in fact, in place.

In his presentation, Gundlach cited two financial readings that were particularly troubling: junk bonds and leveraged loans.

Junk bonds, as measured by the "JNK" exchange-traded fund which tracks that asset class, is down about 6% this year, including the coupon — or regular interest payment paid to the fund by the bonds in the portfolio.

Overall, Gundlach thinks it is "unthinkable" that the Fed would want to raise rates with junk bonds behaving this way.(Doubleline Capital)

Screen Shot 2015 12 08 at 4.54.12 PM

Meanwhile, leveraged loan indexes — which tracks debt taken on by the lowest-quality corporate borrowers — have collapsed in the last few months, indicating real stress in corporate credit markets.

"This is a little bit disconcerting," Gundlach said, "that we're talking about raising interest rates with corporate credit tanking."

Screen Shot 2015 12 08 at 4.54.30 PM

(Doubleline Capital)

Gundlach was also asked in the Q&A that followed his presentation about comments from this same call a year ago that indicated his view that if crude oil fell to $40 a barrel, then there would be a major problem in the world.

On Tuesday, West Texas Intermediate crude oil, the US benchmark, fell below $37 a barrel for the first time in over six years.

The implication with Gundlach's December 2014 call is that not only would there be financial stress with oil at $40 a barrel, but geopolitical tensions as well.

Gundlach noted that while junk bonds and leveraged loans are a reflection of the stress in oil and commodity markets, this doesn't mean these impacts can just be netted out, as some seem quick to do. These are the factors markets are taking their lead from.

It doesn't seem like much of a reach to say that when compared to this time a year ago, the global geopolitical situation is more uncertain. Or as Gundlach said simply on Tuesday: "Oil's below $40 and we've got problems."

NOW WATCH: Ian Bremmer: Angela Merkel is going to have a bad 2016



More From Business Insider

  • Business
    Bloomberg

    Beyond Meat Products Pulled From Tim Hortons Canada Restaurants

    The chain had been serving the Beyond Burger and a Beyond Meat breakfast sandwich made with the company's imitation sausage products. The rollback marks a rare setback for the plant-based meat maker, which currently has partnerships with Carl's Jr., Hardee's and Dunkin' Donuts in the U.S., and recently announced an expansion of its partnership with Subway in Canada to begin serving meatball subs nationwide. A Beyond Meat spokesperson confirmed this was a limited time offer and the companies may work together in the future.

  • 3 “Strong Buy” Stocks Under $5 That Are Ready to Run Higher
    Business
    TipRanks

    3 “Strong Buy” Stocks Under $5 That Are Ready to Run Higher

    With Orbcomm's shares trading roughly 4X our 2021 adjusted EBITDA estimate, we view the risk reward on the shares as very positive… We believe if management can execute, the shares should return to higher multiples. What does it mean, then? It means that Walkley keeps his Buy rating on Orbcomm.

  • Analysts divided on how much further Apple shares can climb after ‘blowout results’
    Business
    MarketWatch

    Analysts divided on how much further Apple shares can climb after ‘blowout results’

    No doubt investors are ready to push Apple shares higher Wednesday after record results, but some analysts appeared divided as to how much further this will juice the stock. Apple shares (AAPL) rallied Tuesday after the consumer technology giant reported the second-best quarter ever for iPhone sales, pushing well past expectations and the holiday quarter also saw strong performances from wearables, home and accessories. Shares rose 1.4% in late trade after a forecast-beating revenue outlook for the March quarter.

  • Typical Retirement Savings By Age Groups: Are Yours Bigger?
    Business
    Investor's Business Daily

    Typical Retirement Savings By Age Groups: Are Yours Bigger?

    Active savers — in this case, Americans who own an IRA and-or a 401(k) account in the custody of Fidelity Investments — had savings for retirement of $215,400 as of Sept. according to new data IBD has obtained from Fidelity. In contrast, the average for all working-age families is shockingly low.

  • Wuhan Coronavirus Infections Could Be 30 Times Higher Than Official Total, Hong Kong Researchers Warn
    World
    Meredith Videos

    Wuhan Coronavirus Infections Could Be 30 Times Higher Than Official Total, Hong Kong Researchers Warn

    The number of people infected with a SARS-like form of coronavirus in Wuhan, China could already be more than 30 times higher the the official tally, researchers in Hong Kong have warned.

  • Apple earnings and sales surge to record, sending stock toward new highs
    Business
    MarketWatch

    Apple earnings and sales surge to record, sending stock toward new highs

    Apple Inc. shares ticked higher in aftermarket trading after the company posted record quarterly results for its holiday quarter Tuesday afternoon while easily topping expectations. Apple (AAPL) also saw strong performance once again from its wearables, home and accessories category, with revenue up 37% to $10.01 billion, another beat relative to the consensus view. Strength in those two segments made up for a disappointing performance from the services business and helped carry Apple to record earnings and revenue.

  • What to expect in Tesla's 4Q 2019 earnings results
    Business
    Yahoo Finance

    What to expect in Tesla's 4Q 2019 earnings results

    Tesla (TSLA) is scheduled to report quarterly results Wednesday after market close, giving investors a look under the hood at the company's financial performance as its operations in China ramped well ahead of schedule and deliveries hit a fresh record. Here are the main metrics expected from Tesla's fourth-quarter 2019 report, compared to consensus expectations compiled by Bloomberg: Revenue: $7.05 billion vs. $7.23 billion Y/Y Adjusted earnings per share: $1.74, vs. $1.93 Y/Y Tesla's stock has more than doubled since its third-quarter earnings results in October, surging well above the $420 per-share level CEO Elon Musk once considered in a dropped plan to take the company private.

  • Jeff Bezos throws a D.C. shindig and Amazon employees protest policy
    Business
    American City Business Journals

    Jeff Bezos throws a D.C. shindig and Amazon employees protest policy

    That stock dip cost CEO and founder Jeff Bezos roughly $2.6 billion in stock value. quot;Scourge of counterfeiting": So, back to the DHS report. The Trump administration said it will clamp down on counterfeit products by targeting sellers and the online platforms they use in a move that could affect Amazon.

  • ‘He owed a lot of back taxes.’ My ex-husband forgot to sign paperwork to split a sizable investment account — then he died. Can his estate claim that money?
    Business
    MarketWatch

    ‘He owed a lot of back taxes.’ My ex-husband forgot to sign paperwork to split a sizable investment account — then he died. Can his estate claim that money?

    One of our investment accounts was ordered to be split $30,000/$60,000, as per our divorce agreement. The investment company says the account is now all mine. Your question has two parts: can his estate come after you for back taxes and can his estate claim the money in your investment account.

  • Business
    TheStreet.com

    Jim Cramer: 6 Stocks to Buy on Coronavirus Fears

    The selling was so intense in that period that it didn't matter if you were buying Verizon or Caterpillar or American Electric Power . There were so many people who left Wuhan, the epicenter, when they were still healthy and they are now coming down with the illness. It's pretty clear that the virus spreads from rapidly person to person, so rapidly that we are hearing lots of conspiracies about a bio lab in Wuhan that might have mistakenly discharged the coronavirus and it was not transmitted initially by animals to humans.

  • The problem with AMD’s data-center business
    Business
    MarketWatch

    The problem with AMD’s data-center business

    If Advanced Micro Devices Inc. is indeed serious about being in the data-center business, the chip maker needs to start telling investors what is happening in that business. AMD'S stock has been on this roll over the past two years largely due to expectations that it would challenge dominant Intel Corp. (INTC) in the higher-margin server market. AMD said its fourth-quarter results were “partially offset” by the semi-custom business, which is mostly driven by custom chip designs for videogaming consoles, a business that is expected to pick up in the second half with a new generation of consoles from Microsoft Corp. (MSFT) and Sony Corp. (SNE) .

  • Business
    Benzinga

    Q4 Earnings Preview For AT&T

    AT&T (NYSE: T) will be releasing its next round of earnings this Wednesday, January 29. For all of the relevant information, here is your guide for Wednesday's Q4 earnings announcement. Based on AT&T management projections, analysts predict EPS of 87 cents on revenue of $46.95 billion.

  • Dow Jones Futures: Apple, AMD, Xilinx Earnings Fuel Big Chip Moves After Stock Market Rebounds From Coronavirus Sell-Off
    Business
    Investor's Business Daily

    Dow Jones Futures: Apple, AMD, Xilinx Earnings Fuel Big Chip Moves After Stock Market Rebounds From Coronavirus Sell-Off

    Dow Jones futures rose modestly Wednesday, along with S&P 500 futures and Nasdaq futures, as Apple stock continued to lead the way. The stock market rally rebounded Tuesday after Monday's sell-off on coronavirus fears. Apple, along with chipmakers Advanced Micro Devices, Maxim Integrated Products and Xilinx, reported earnings after the close.

  • The first stock-market ‘correction since October has begun,’ says Morgan Stanley analyst who called 2018 tech rout
    Business
    MarketWatch

    The first stock-market ‘correction since October has begun,’ says Morgan Stanley analyst who called 2018 tech rout

    However, his prediction that the market is more likely to decline by half that much indicates that he's forecasting a retreat from stocks that have hovered near records rather than a traditional correction. Wall Street investors, perhaps, shouldn't need the strategist to determine the current state of the equities, however. On Monday, the Dow Jones Industrial Average Stock markets have traded south in the past several sessions, with the Dow momentarily losing its grip on gains for 2020, as a rapidly spreading virus in China has sparked fears of a global outbreak that could curtail economic expansion in the world's second-largest economy.

  • Witnesses describe Bryant helicopter crash
    News
    Associated Press Videos

    Witnesses describe Bryant helicopter crash

    A witness says the helicopter crash that killed nine people including former NBA star Kobe Bryant in Calabasas, California on Sunday sounded like 'a big thud. Jan.

  • Ex-Best Buy exec linked to CEO probe denies affair with Corie Barry
    Business
    American City Business Journals

    Ex-Best Buy exec linked to CEO probe denies affair with Corie Barry

    A former executive at Best Buy Co. Inc. who was alleged to have been romantically involved with Best Buy CEO Corie Barry — a claim that triggered an investigation of the retailer's leader — has denied the allegations. The Star Tribune reports that Karl Sanft, who had been a senior vice president of retail operations at Richfield-based Best Buy (NYSE: BBY) before leaving the company last fall, issued a short rejection via email: "The anonymous allegation that I had an affair with Corie Barry is false." Sanft, now chief operating officer at a California fitness company, was named in an anonymous letter sent to Best Buy's board of directors last month that alleged Barry had engaged in an inappropriate romantic relationship with him before she became CEO. The letter became public knowledge after The Wall Street Journal reported that Best Buy had begun an independent investigation into the matter.

  • Business
    Benzinga

    4 Reasons To Buy Aurora Cannabis Stock

    It's been a rough year for cannabis stocks and even though Aurora Cannabis (NYSE: ACB) is one of the most notable companies in the sector, it had its fair share of struggles in 2019. Following that yearlong downtrend, here are a few reasons to consider buying Aurora's stock in 2020. "Yes, he was quite visible with investors and spoke with retail and institutional investors, but the three key people at ACB in terms of setting strategy are Chairman Michael Singer, CEO Terry Booth, and CFO Glen Ibbott," Cantor Fitzgerald's Pablo Zuanic wrote in a Jan. 13 note.

  • 3 Tech Stocks to Play the 5G Boom In 2020
    World
    TipRanks

    3 Tech Stocks to Play the 5G Boom In 2020

    Older chips are not compatible with the new technology, and semiconductor and smartphone makers – who have had a rough time in recent years – see a positive turn ahead as they roll out upgraded products. From an investor's perspective, the hardware makers' coming 5G boom represents an opportunity. As equipment manufacturers and end users switch to the new devices, the hardware companies will see increased sales, higher profits, and a consequent rise in share prices.

  • Business
    Benzinga

    General Electric's Q4 Earnings Preview

    On Wednesday, January 29, General Electric (NYSE: GE) will release its latest earnings report. Benzinga's report can help you figure out the ins and outs of the earnings release. Wall Street analysts see General Electric reporting earnings of 18 cents per share on revenue of $25.44 billion.

  • AMD stock slides as forecast, data-center segment come in lower than expected
    Business
    MarketWatch

    AMD stock slides as forecast, data-center segment come in lower than expected

    Advanced Micro Devices Inc. failed to live up to Wall Street's high expectations Tuesday, damaging its high-flying stock. The company said it expects revenue of $1.75 billion to $1.85 billion for the first quarter — analysts surveyed by FactSet had forecast revenue of $1.86 billion — and revenue growth of about 28% to 30% for the full year, roughly in line with analyst estimates. The company's results topped Wall Street estimates, with fourth-quarter revenue of $2.13 billion rising from $1.42 billion in the year-ago period and topping the average analyst outlook of $2.11 billion, but sales in the segment containing data-center and gaming-console chips fell short of what analysts were expecting.

  • Apple earnings: Sales beat expectations led by iPhone and wearables
    Business
    Yahoo Finance

    Apple earnings: Sales beat expectations led by iPhone and wearables

    Apple (AAPL) reported its Q1 2020 earnings results on Tuesday, and beat Wall Street analysts' top and bottom line estimates thanks to strong sales through the 2019 holiday shopping season. Here are the most important numbers from the report, as well as what analysts had projected for the quarter as compiled by Bloomberg. Revenue: $91.8 billion versus $88.4 billion expected Earnings per share: $4.99 versus $4.55 expected iPhone revenue: $55.96 billion versus $51.50 billion expected Services revenue: $12.72 billion versus 12.98 billion expected Q2 2020 guidance was also above expectations for the tech giant, coming in at $63 billion to $67 billion compared to Wall Street estimates of $62.33 bi...

  • How to keep your retirement accounts safe
    Business
    MarketWatch

    How to keep your retirement accounts safe

    The thought of losing your life savings to hackers can be terrifying — and it's why two of Houston financial adviser Michelle Gessner's clients didn't want to consolidate their retirement assets, even if the move would be financially savvy. The couple had already been the target of identity theft in the past, then with their credit cards, and they were afraid that if they rolled all their money together, they'd be “sitting ducks” at risk of losing their entire nest egg. “The question is real and understandable,” Gessner said.

  • AbbVie Is Nearing Takeover Of Allergan — Is It Time To Add AbbVie Stock?
    Business
    Investor's Business Daily

    AbbVie Is Nearing Takeover Of Allergan — Is It Time To Add AbbVie Stock?

    AbbVie stock ended 2019 on a high note — rocketing about 40% from its low point in August as investors re-evaluated the $63 billion plan to buy Botox-maker Allergan. The takeover deal certainly helps AbbVie diversify away from Humira, a blockbuster drug that treats inflammatory conditions. Humira already faces biosimilar rivals in Europe, and will lose patent protection in the U.S. in 2023.

  • Business
    Reuters

    Dow operating profit drops on lower prices, sees recovery in 2020

    Dow Inc reported a 27% fall in fourth-quarter operating profit on Wednesday as lower prices squeezed margins, but the chemicals maker pointed to a recovery in demand this year on the back of easing trade tensions. An oversupplied market and uncertainties stemming from a prolonged U.S.-China trade war have hit prices for polyethylene, the main ingredient used in making most plastics "(2020 will see) not necessarily a snapback but improving demand as we go through the year just based on restocking to a normal demand pattern," Chief Financial Officer Howard Ungerleider told Reuters.

  • Goldman Sachs: 3 Healthcare Stocks to Snap Up Now
    Business
    TipRanks

    Goldman Sachs: 3 Healthcare Stocks to Snap Up Now

    Highlighting the healthcare services sector in particular, the firm notes that while it anticipates fourth quarter results will fall in line with expectations, the key area to watch is 2020 guidance. We believe 2020 outlooks will matter more, and see some potential for these updates to be overshadowed by political developments – specifically, upcoming Democratic primaries, where investors seem braced for a win (or two) by Senator Sanders, a Democratic candidate who supports the elimination of private health insurance,” analyst Stephen Tanal explained.