Gundlach Sees Trump Win, Short-Term Market 'Reversals'

The 12-month deficit was $3 trillion as of June 30. The Congressional Budget Office has projected that the annual deficit could hit $3.7 trillion for the fiscal year ending Sept. 30.

Total federal debt held by the public was $19 trillion as of May 30, with intra-governmental holdings at nearly $6 trillion. That puts the total national debt at some $25 trillion. U.S. GDP was $21 trillion in 2019.

This budget growth "is getting almost surreal in terms of what's happening," Gundlach said.

Gold Matters

"Gold will ultimately go much higher because … the dollar is going to go much lower [over time]," he explained, connecting the currency's long-term movement to national debt.

"But I think the dollar's decline is probably nearly over [in the short term], and therefore gold's [high is over, too,] for the time being," Gundlach said.

Most markets today "have kind of lost some of their momentum off the recent moves," he added. "So gold has hit short-term 'highish.' I mean, it could always retest it, but it's made a very big move up [of] more than 50% in two years."

Zero Rates? 

"Interest rates look like they're rising gradualistically until such time as the [Federal Reserve] institutes yield curve control, whatever that might be," according to Gundlach. "And it's talked about a lot."

Back in March or April, he added, "there was [talk about the Fed] just going to have a zero interest rate policy." 

In his view, interest rates should "stay near zero, certainly for quarters to come — if not years." 

The Stock Rally? 

The "risk rally" that started off of the March lows is "probably getting long in the tooth," Gundlach said. 

"I'm looking for a lot of short-term reversals as the general theme for the markets, and that goes for gold, as well," he explained. 

What to Do? 

People often ask him about what investment strategy to follow given so much uncertainty. "I say, 'You should really probably break your assets into three pieces,'" Gundlach said. 

First, "hold cash significantly against the potential for deflation," he said. 

Second, "own gold or something like that for the long term, because that's something that's got real asset value and will help you for inflation," the DoubleLine CEO stated.

Third, "own some stocks, because even though I'm not positive on stocks, I've realized that it's possible that we go into a inflationary situation where at least stocks [have] the possibility of adding a zero to their [price]," he explained. "You're … not going to be able to do that with [many other] asset classes."

— Related on ThinkAdvisor:

• Gary Shilling: Why Bond Yields Are Sending Stocks a Scary Signal
• Gundlach: Stocks Headed for Trouble; Fed Could Bend Yield Curve
• The 2020 IA25: Jeffrey Gundlach