Gundlach anticipates outperformance from Europe and emerging markets

MIAMI BEACH, FL. – Billionaire bond manager Jeffrey Gundlach is already preparing a play for the next recession, when it comes.

Gundlach (pictured), the managing director of fixed income boutique DoubleLine Capital, told attendees of the Exchange 2022 conference in Miami Beach, Florida, that he expects European equities and markets emerging markets are doing well in an environment where the dollar is weakening.

‘When the next recession comes, I believe, my strongest idea [is that] the US dollar is down, because the US dollar is following the twin deficits,” Gundlach said. “The trade deficit has exploded with the money pulverized by Chinese goods and other Southeast Asian goods. And of course, the budget deficit is higher than it has ever been in anyone’s lifetime in the history of the United States. When these deficits increase, the long-term trend is that the dollar will fall.

Gundlach said emerging market equities could likely outperform the U.S. stock market by more than 100%, linking that possibility to the valuation gap between U.S. and emerging equities and recent gains in commodity prices.

He added that while U.S. equities have largely outperformed European equities for the better part of a decade, the performance of the two asset subclasses has been about the same since the middle of 2020. Gundlach said DoubleLine had chosen last year to reduce part of its exposure. to US stocks to buy European stocks.

“It’s really weird,” Gundlach said. “Reversing a trade that has been right for 10 years is so difficult. It’s like a death in the family.

Funds under Gundlach’s purview include the DoubleLine Total Return Bond Fund, which manages approximately $43 billion in assets.

Mary I. Bruner