Billionaire investor Jeff Gundlach said that stocks are oversold and he expects stocks will be higher before the next Fed Reserve meeting. Gundlach also said that the Fed is “way behind” and that Fed Chair Jerome Powell did an “Ok” job today.
“I think the stock market was way oversold, I think commodities got way overbought and so I’m not surprised we’ve had relative market stability into this Fed decision and I expect the oversold will continue to work its way higher,” the DoubleLine Capital founder and CEO said in an interview with CNBC.
The Federal Reserve’s policymaking arm lifted the federal funds rate target range by 25 basis points to 0.25%-0.5%, in the first increase since 2018 and the first time rates have been above the effective lower bound since the pandemic rattled markets in March 2020.
“I think the market kind of likes the fact that the party is going on,” Gundlach said. “They sort of like the fact that the Fed is behind the curve for now even though it means that they may to accelerate and get in front of he curve. For now rates are still really accommodative.”
All FOMC members except one voted for the 25 bps rate increase; St. Louis Fed President James Bullard, the only dissenting vote, preferred a 50 bps hike to 0.50%-0.75%.
“I think the market will roll over once the Fed raises rates a couple more times and if they start the roll off, which he sort of alluded to being the base case at the next meeting,” Gundlach added. “I think that’s when you’ve got the double whammy.”
Separately he added in the interview that “I think bonds broadly are sorta Ok in spite of their bad valuation.”
He also said he would prefer bitcoin (BTC-USD) over gold from now through the next Fed meeting.
Last month, Gundlach warned that the Federal Reserve will likely trigger a recession as it seeks to increase interest rates in the face of a mounting inflationary threat.