DoubleLine Capital CEO Jeffrey Gundlach said he sees additional rate hikes from the Federal Reserve before the central bank ends its tightening cycle.
“I think one more thing,” Gundlach said Wednesday on CNBC’s “Closing Bell: Overtime.” “I think it’s hard to make a ‘continue to increase’ statement with an ‘s’ at the end of the word ‘increase’ and do zero unless you have a significant change in economic conditions.”
The Fed on Wednesday raised its benchmark interest rate by a quarter percentage point, taking its target range to 4.5%-4.75%, the highest since October 2007. . in target range.”
The so-called bond king said Fed Chairman Jerome Powell had a “clarifying” statement at a news conference Wednesday, saying real yields are positive on the curve. Gundlach said he was referring to Treasury Inflation-Protected Securities (TIPS), whose yields have stopped rising.
“They look at the TIPS market, which produced a large yield last year. This is a major headwind for risk assets in the stock market,” said Gundlach. “They have stopped going up and I have a feeling that the actual results will not go up in the first part of this year. So, I think.”
Stocks staged a comeback in January, led by technology names that lost. At S&P 500 rallied 6.2% in January, notching the best start to the year since 2019. Nasdaq Composite jumped 10.7% last month for its best monthly performance since July.
At Powell’s press conference, the Fed chief said the central bank could do some more rate hikes to bring inflation down to its target.
“We’ve raised rates four and a half percentage points, and we’re talking about some more rate increases to get to the level that we think is really restrictive,” Powell said. “Why do we think that’s probably necessary? We think it’s because inflation is still very hot.”
Asked if Gundlach saw the Fed cutting rates this year, he said there was a coin, depending on incoming inflation data.
“I think they’re going to cut rates in the second half of the year, but I’m not really committed to that idea,” Gundlach said.
Investors who follow many also say that the probability of a recession this year has decreased, but is still above 50%.