Source: Fortune
Summary
DoubleLine Capital LP CEO Jeffrey Gundlach believes the Federal Reserve will not cut interest rates at its next policy meeting due to high inflation. Gundlach attributes this to the two-year Treasury being almost 50 basis points higher than the Fed funds rate. He also predicts that inflation will continue to rise, with the consumer price index potentially starting with a 4% increase. Gundlach notes that the stock market has been strong despite turmoil, but warns that it is “very expensive” and “very speculative.” He also reiterates his concerns about the private credit market.
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The numbers tell one story.
Gundlach’s comments come as the Fed faces a “rough time” with Kevin Warsh taking over as chair. The Iran war’s impact on oil prices and US inflation reports will likely continue to drive inflation up. Gundlach’s models suggest a 4% increase in the headline CPI. The stock market’s strength despite turmoil is a sign of speculation, fueled by strong earnings. Gundlach’s warnings about private credit are a reminder that some sectors are due for a correction.
The Fed’s inaction on inflation is a green light for the stock market’s speculative fervor.
Author: Evan Null
