Could Jeffrey Gundlach rate dove view be correct going forward?  

“The Fed should not have raised rates again,” says DoubleLine Capital’s Jeffrey Gundlach in June and since then the Fed has held rates steady.

Jeffrey Gundlach is a rate dove based on the yield curve inversion, which has been a reliable recession indicator.  

An inverted yield curve is a rare situation in the economy where short-term debt pays more than long-term debt.

In other words, investors are losing confidence in the prospects of the economy and don’t see good long-term prospects holding risk assets.

“The Fed should not have raised rates again”

WEALTH TRAINING COMPANY

Past yield curve inversions have been a reliable recessionary indicator

“Recessionary signals you have to watch are when the yield curve gets very inverted,” said Jeffrey Gundlach. 

The yield curve normalising is what you have to look for, and it has not happened, according to Jeffrey Gundlach. 

The three-month treasury to the ten-year has inverted, which he is watching.  

“We are also watching the gap from consumer views when the present starts to deteriorate and meet up with the future, which is almost always on the pessimistic side, which is weird,” added Jeffrey Gundlach. 

Jeffrey Gundlach noted in June that Consumers believe the economy will worsen in 12 months, which has proven to be correct thus far. 

“That has started to narrow a bit, but not enough yet,” he said 

“Recessionary signals you have to watch are when the yield curve gets very inverted”

GEFFREY GUNDLACH

But Jeffrey Gundlach said that inflation was coming down in June, which was not so. 

Forecasting the future and human behaviour is a dicey business, making even the most respected experts humble. Exhibit one; US Consumer Price Index (CPI), shows CPI inflation rising steadily since June. 

The Consumer Price Index in the US increased by 3.7% year-on-year to 307.026 points in August 2023, which is an acceleration from the 3.2% growth recorded in the previous month.

Ella Fitzgerald Lyrics. “Summertime and the living is easy,” 

we could see a sharp drop in CPI going into Autumn as credit card expenses come due for payment” – Wealth Training Company

First post lockdown Summer, and people went on a YOLO speeding spree, maxing out their credit?

CPI inflation excludes food and high volatility swings of energy.

So our fifty cents says we could see a sharp drop in CPI going into Autumn as credit card expenses come due for payment.

The ongoing escalating war in Europe could throw out Jeffrey Gundlach rate dove view  

But the wild card is the war in Europe, human behaviour under extreme stress. 

According to the Federal Emergency Management Agency (FEMA), in coordination with the Federal Communications Commission (FCC), a nationwide test of the Emergency Alert System (EAS) and Wireless Emergency Alerts (WEA) is scheduled to take place on Wednesday, Oct. 4, 2023, at approximately 2:20 p.m. ET.

How will WEAs affect the collective psychology and spending habits, which impacts CPI inflation?

Could we see a YOLO spending psychology, which could send the CPI inflation higher? 

If consumers thought they had days and weeks to live, would they party, spend, until the lights go out? 

“The wild card geopolitical uncertainties, the war in Europe, as the two great powers battle it out, is creating unprecedented FUD, fear uncertainty, and doubt” – Wealth Training Company

Bond king, Jeffrey Gundlach rate dove view is in harmony as the CEO of the world’s largest fixed-income fund, DoubleLine, rising inflation adversely impacts the portfolio value of long-maturity bonds.

The market-to-market portfolio losses investors are seeing on the 30-year Treasury, investors who bought in 2020 August when the yield was around 1%, are unprecedented. The losses on long-maturity treasuries are the crux of this ongoing global bank liquidity crisis, bearing in mind treasuries are the pillar of Western finance and considered safe haven assets where commercial banks pledged as collateral to raise loans. 

But uncontrollable inflation makes paper worthless.   

Think about it, if you held a bunch of wealth in paper, bonds, or fixed-income assets and the nation had a 94,5% annual inflation rate due to a debased currency and the 10-year sovereign bond was yielding say 50%, you would be losing big time to inflation. 

So you get your money back after 10 years, but the exchange value of the currency is worthless. Argentina has a 94.5% annual inflation rate, with 10-year sovereign bonds yielding 50% but investors are not falling over themselves to buy it because the local currency is worthless. 

The penny drops when you understand that the Fed must arrest inflation or risk a meltdown in the treasury market, which could collapse the USD and trigger a global banking collapse, You realise the Fed is dead serious about controlling inflation and would likely do so at all costs. 

The trajectory of CPI inflation in autumn could determine whether Jeffrey Gundlach’s rate dove view is right or continues to be wrong

The wild card geopolitical uncertainties, the war in Europe, as the two great powers battle it out, is creating unprecedented FUD, fear uncertainty, and doubt.

By the time you read this piece, the US population will have received test national emergency alerts to shelter in the event of an incoming danger, an ICBM with a nuclear warhead.

At the time of writing this piece, Russian authorities are holding large-scale drills across the country. 

Irrespective of whether this is theatre or preparation for the apocalypse, this is likely to impact human behaviour, spending patterns and the future CPI inflation data. So FUD, plus YOLO, could equal CPI to the moon and more stress in the bond market.