Gundlach: Markets Like Split Government, But Equities are “Really Overvalued”

Reflecting on the post-election landscape, Jeffrey Gundlach expects a split government to emerge, with a Biden presidency, Democratic House and Republican Senate. That outcome explains the gains in U.S. equities this week, but stocks are now “really overvalued.”

Gundlach is the founder and chief investment officer of Los Angeles-based DoubleLine Capital, a leading provider of fixed-income mutual funds and ETFs. He was interviewed via webinar on November 5 by Alex Shahidi, who is a managing partner and co-chief investment officer at Evoke Advisors and ARIS Consulting, a Los Angeles-based investment advisor, as part of its master speaker series.

Earlier this week, Gundlach reiterated his “low-conviction” prediction that Trump would win the presidency in a likely tight race. Today, he acknowledged that was unlikely, but was confident that the Republicans would maintain control of the Senate.

He said he was surprised how deeply and evenly split the country is. He was not surprised by how wrong some of the polls were, citing one that predicted Biden by 17% in Wisconsin and national polls predicting Biden winning by up to 10% of the popular vote.

Gundlach did not validate Trump’s claim of illegal voting, but said that it was “weird” the Wisconsin turnout was 90%. “Not even that many people think Elvis is dead,” he said, tongue-in-cheek. (The claim that Wisconsin's turnout was unusually high has been debunked.)

The down-ballot losses incurred by the Democrats, such as the House seats they lost, were “predictable,” he said, as a result of the weakness of Kamala Harris. He called Harris “socialist-like,” and that led many to hedge their bets. Voters were worried that Biden may not make it four years, and don’t want a socialist agenda.