Gundlach – Trump will Defeat Biden; Avoid the Bond Market

Jeffrey Gundlach, who famously predicted Donald Trump’s victory in 2016, said that the president will defeat the presumptive Democratic nominee, Joe Biden, in November. He also dimmed the expectations of fixed-income investors when he said to avoid short- and long-term bonds.

Gundlach is the founder and chief investment officer of Los Angeles-based DoubleLine Capital. He spoke to investors via a conference call at 4:15 pm on August 11. The focus of his talk was DoubleLine’s fixed-income closed-end funds, DBL, DSL and DSY. There were no slides accompanying his presentation.

I’ll come back to Gundlach’s political predictions, but first I will review his remarks about his funds, the economy and the capital markets.

DBL is the closed-end version of DoubleLine’s flagship total-return mutual fund, DBLTX. Interestingly, Gundlach said it has a duration of zero, because some of its assets, like collateralized loan obligations (CLOs) and asset-backed securities (ABS), have durations of -5 and -6, respectively. They move in the opposite direction of Treasury bonds. The fund, he said, may be volatile but it is not correlated to bonds.

As with most closed-end funds, Gundlach said that price movements – and whether they trade at a premium or discount – are mostly a function of supply and demand on the NYSE.

The DoubleLine closed-end funds traded at extreme discounts in March. That could happen again. He said it was because, “fear and loathing overwhelmed the demand.” Gundlach noted that similar price dislocation happened in gold a few years ago and in Delta Airlines’ stock in March.