DoubleLine Capital co-founder Jeffrey Gundlach, widely followed for his investment calls, warned after the weak jobs number on Friday that the U.S. equity market as well as other risk markets including high-yield “junk” bonds face another round of selling pressure.
Read More Job creation misses big in September
“The reason the markets aren’t going lower is people are holding and hoping,” Gundlach said in a telephone interview with Reuters. “The market bottoms out when people are selling and sold out — not when they are holding and hoping. I don’t think you’ve seen real selling in risk assets broadly. Markets need buying to go up and they need volume to go up.They can fall just on gravity.”
Investors piled into government bonds on Friday, sending the 10-year Treasury yield below 2 percent, after the Labor Department said employers hired 142,000 workers last month, far below the 203,000 forecasters had expected, and August figures were revised sharply lower to show only 136,000 jobs added.
Gundlach said junk bonds are vulnerable: “I’ll think about buying when it stops going down every single day.”
“People are acting like everything is great. Junk bonds are at a four-year low. Emerging markets are at a six-year low and commodities are at a multi-year low – same level as in 1995… GDP is not growing at a nominal basis.”
Gundlach, whose Los Angeles-based DoubleLine was overseeing $ 81 billion in assets under management as of the end of the third quarter, said: “Clearly what’s happening is people are waking up to the idea that global growth is not what they thought it was.”
Even International Monetary Fund Managing Director Christine Lagarde affirmed this, Gundlach said: “You talk about an important moment when somebody who is traditionally a cheerleader for a bright future says, ‘I have to downgrade my global growth forecast,’ as Lagarde did.”