- DoubleLine CEO forecast slow 2015 inflation, low rate increase
- Flagship fund outperformed 98 percent of Morningstar peers
No wonder thousands are expected to tune in today for Jeffrey Gundlach’s 2016 outlook.
The DoubleLine Capital co-founder was mostly right on his calls a year ago: oil prices would fall, junk bonds would live up to their name, China was flashing danger signs and interest rates would go sideways.
The fund manager also missed on some of his predictions. Gold prices, for example, went down instead of up.
“You’d be crazy not to listen to him,” Bill Lowery, chief investment officer of Lowery Asset Consulting, a Chicago-based firm whose $7 billion in assets includes DoubleLine fund holdings. “He’s a great source to challenge any assumptions you’re making. If you are going to be on the opposite side of one of his opinions, you better have a thoughtful rationale.”
Gundlach’s $52 billion DoubleLine Total Return Bond Fund earned 2.3 percent in 2015, outperforming 94 percent of Bloomberg peers and 98 percent of its Morningstar Inc. category. His webcast a year ago drew 4,209 live and 1,274 replay listeners, according to Loren Fleckenstein, an analyst for Los Angeles-based DoubleLine Capital.
Here’s a sampling of Gundlach’s forecasts made on Jan. 13, 2015, and how they fared:
The call: “Oil just doesn’t go up,” Gundlach said. “Countries won’t cut production. They need revenue, putting prices lower. ”
What happened: The price of a barrel of Brent crude fell to its lowest level since 2004 last week. Global production climbed to 95.9 million barrels a day in November from 94.7 million barrels a year earlier. A Morgan Stanley note Monday warned of prices falling as low as $20 a barrel.
The call: Junk bonds would head lower as energy-related and emerging market dollar-denominated debt faced repayment challenges. “Don’t go whistling through the graveyard,” Gundlach said.
What happened: The Bank of America/Merrill Lynch index of high-yield debt lost 4.6 percent, falling sharply in August when China’s economy flashed warning signals and again in December after Third Avenue Management said it was liquidating a $788.5 million corporate debt mutual fund and delaying distributions to avoid bigger losses.
The call: Inflation will stay low, if not go negative, and buying Treasury Inflation Protected Securities is a bad move. “TIPS are for losers,” Gundlach said. “Inflation is going to be nonexistent.”
What happened: The cost of living barely budged through November, the most recent monthly data available. Core inflation, which excludes volatile food and energy, rose 0.2 percent for a third straight month in November, holding well below the Federal Reserve’s goal.
The call: “For those of you that want to own gold, this is as good a time as you’ve ever had in the last few years.”
What happened: Gold, which was trading at $1,234 the day of Gundlach’s presentation, rose to a high of $1,301 nine days later and ended last week at $1,097, down more than 10 percent for the year.
The call: The Fed will raise rates, but not much. “We might get a couple of rate increases to see what happens,” Gundlach said.
What happened: The Federal Funds Rate was increased by 25 basis points, or a quarter of a percentage point, on Dec. 16, the first hike since 2006. The central bank had delayed making the move earlier in the year amid lingering concerns for U.S. and global economies. Gundlach repeatedly cautioned against raising rates, saying countries from Norway to New Zealand were forced to reverse increases following the 2008 financial crisis.