Gundlach says now is not the time to take big risks in the bond market

Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital, speaks at the Sohn Investment Conference in New York, May 5, 2014. REUTERS/Eduardo MunozThomson

The U.S. dollar has been and will likely continue to be on a
gentle weakening pattern, Jeffrey Gundlach, chief
executive at DoubleLine Capital, said on an investor webcast late
on Tuesday.

Gundlach, who oversees more than $100 billion at Los
Angeles-based DoubleLine, said the dollar “has not gone up in the
past 18 months.” Gundlach has said repeatedly the
strength in the U.S. dollar after Donald Trump’s presidential
victory would reverse itself.

Gundlach said about the soft dollar in a follow-up
interview with Reuters, “The trend is your friend. The dollar
went up 30-plus percent from lows in 2011. That’s a big vote for
a currency. Plus, President Trump does not want a stronger

Last month, Goldman Sachs abandoned the two strong dollar plays
in its 2017 trading recommendations, pointing to the Trump
administration’s concerns over the strength of the currency,
along with improvement in growth in rival economies.

In a note to clients, Goldman analysts said “a number of
fundamentals have changed on the margin, such that the
long-Dollar story no longer warrants a place among our ‘Top

As for interest rates, Gundlach said he expected the
yield on the 10-year Treasury to move higher. “I would prefer not
to take a lot of interest rates risk now,” Gundlach
said. He also said he is “not a big fan of long duration”

Gundlach said he does not see stocks under severe
selling pressure with the 10-year yield around 2.25 percent. But
if rates rise significantly, that will likely touch off a selloff
in stocks during the summer, Gundlach said.

“I think it’s wrong to characterize the environment as a ‘flight
to safety’,” as the Treasury rally has been weak,
Gundlach said. He would characterize the environment
as a low volatility one, he added.

On gold, Gundlach said he sees “another leg up” in
prices and that “it is not a time to give up on gold.”

(Reporting By Jennifer Ablan; Editing by David Gregorio and Chris

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