Having nailed the upturn in US Treasury yields, DoubleLine's Jeffrey Gundlach is now considerably less exuberant on Trumponomics. Speaking on his first webcast post-election, Reuters reports that Gundlach warned that a reversal of support for Donald Trump could take hold as expectations are dashed that the newly president-elect can quickly spur economic and job growth, echoing Goldman's dysphoria.
Gundlach, who oversees more than $106 billion at Los Angeles-based DoubleLine, said Trump "does not have a magic wand" to rapidly improve the economy.
He said federal programs take time to implement, rising mortgage rates and monthly payments are not positive for the "psyche of the middle class and broadly", and supporters of defeated Hillary Clinton are not in a mood to spend money.
"Maybe liquor sales will go up," Gundlach said on the regular investor webcast. "The Trump win is not positive for consumer spending."
Gundlach also said that in the short-term, "It's way late to be selling bonds and buying stocks. Probably should be doing the opposite."
Gundlach, who voted for Trump and had predicted in January that Trump would win the presidential election, said investors should purchase the 10-year Treasury note if it hits in the 2.30-2.35 percent range. Gundlach said he knew Trump would win because he eliminated the weakest candidate. Gundlach added that he has predicted every Presidential Election correctly since 1972.
Gundlach's presentation slides are below:
As a reminder, here is Goldman's punchline:
Our simulations suggest that Mr. Trump’s policies might act as a modest drag on global growth. DM growth receives a brief boost from the fiscal stimulus but then weakens and spillovers into EM economies are negative throughout. Our analysis of the alternative policy packages suggests that the risks around this base case are asymmetric. A larger fiscal package could boost global growth moderately more in the near term, but a more adverse policy mix would likely act as a significant drag on world growth in subsequent years.
More importantly, it also means that this latest, incipient spark of global inflation observed over the past few days is about to be drowned in yet another tidal wave of the deflationary tsunami, which in turn will bring back central banks to the fore, as global debt rises to new, unprecedented records, which will make rising interests rates a non-starter and demand more deficit monetization.
In short, enjoy the reflationary impulse while you it's still there; Goldman and Gundlach just called time.
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