InvestIdeas

Advised keeping an eye on the high-yield bond market, a potential “canary in the coal mine” for risk assets.

With debt levels having surged during the pandemic, the increase in borrowing costs is poised to create headwinds for economic growth, and trouble could emerge when short-term rates surpass 1%.

It’s possible that the CPI inflation gauge won’t drop below 4% throughout 2022.

Gundlach reiterated that he bought European stocks for the first time in 12 years.

He didn’t own emerging-markets equities, though he envisioned a scenario when they might outperform U.S. firms.

The twin-deficit problem (that’s the current-account gap and the federal budget deficit) will cause the greenback to fall over time, which bodes well for emerging markets.

He’s not sure “it’s the greatest time to buy commodities” given how much their prices have been rising. And for preservation of capital, he recommended a short-duration bond fund.

He said he last bought gold, personally, in 2018 and that he likes it as a long-term hold.

The S&P 500 has been “massively juiced” by quantitative easing and low rates under central banking policy, according to Gundlach, who said that he favors stocks outside the U.S.

“One of the hardest things” in the investment business is “to change after you’ve been right,” he said.

Gundlach said he expects that European stocks will outperform the U.S., particularly when a recession arrives.

“We think inflation is going to fall ”this year, said Gundlach, but remain elevated. He predicted that it will probably fall to around 6%.