Jeffrey Gundlach, founder of asset manager DoubleLine Capital, is not optimistic about the outlook for stockmarkets. The UK's referendum on European Union membership and Janet Yellen's decision not to raise rates has created "economic and political uncertainty", he tells Barron's. A Brexit-induced recession would hit the US, since "the companies in the Standard & Poor's 500 get more than 40% of their revenue from outside the US, and a big piece of that is Europe".
In the medium term there could be even more political instability, due to the fact that "robots are taking an awful lot of jobs". For example, there are many people who earn their living from driving, he says. "You get a driverless car, and all of a sudden they're unemployed." And automation certainly isn't the only threat to stability, since high debt and demographics are also "putting a big headwind onto economic growth".
Gundlach is sceptical about forecasts of strong profit growth. "If nominal GDP is rising by less than wages" then "profit margins must be squeezed". Central bank policies mean that stocks could keep rising "I wouldn't be surprised if the S&P hit a new high" above 2,200, he says but it's a risky bet. "I would rather miss that 100 points than be the fool who bought at 2,100, only to watch it go to 1,900."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
One investment Gundlach is bullish on is emerging market bonds. "The weaker dollar has been very good for emerging market (EM) debt, which is up 12% year to date." Since there is "almost zero chance the Fed will raise interest rates through November of this year", this means that "the dollar is going to have a hard time", soEM bonds should continue to do well.
-
Who is the richest person in the world?The top five richest people in the world have a combined net worth of $825 billion. Who takes the crown for the richest person in the world?
-
Top 10 stocks with highest growth over past decade - from Nvidia, Microsoft to Netflix, which companies made you the most money?
We reveal the 10 global companies with the biggest returns since 2013. One firm has posted an astonishing 9,870% return, meaning a £1,000 investment would now be worth almost £82,000.
