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Gundlach, who oversees more than $101 billion at Los
Angeles-based DoubleLine, said U.S. economic data support a rate
increase as soon as the next Fed policy meeting on March 14-15,
and further rises this year, after a series of false starts in
2015 and 2016.
"Confidence in the Fed has really changed a lot," Gundlach said
on an investor webcast. "The Fed has gotten a lot of respect
with the bond market listening to the Fed" now that economic
data support the tough rhetoric from Fed officials.
New York Fed President William Dudley, whose branch of the U.S.
central bank serves as its eyes and ears on Wall Street and who
generally spends a couple of hours a week planning policy with
Fed Chair Janet Yellen, played a key role in orchestrating the
messaging of a March rate hike.
Dudley gave markets an initial jolt when he said in a television
interview last week that "animal spirits had been unleashed."
Dudley also said the case for tightening monetary policy "has
become a lot more compelling" since the election of President
Donald Trump and a Republican-controlled Congress.
Gundlach, known on Wall Street as the "Bond King," said on the
webcast that inflationary pressures are increasing as well as
business confidence, which will translate into a stock market
that will "grind higher."
But Gundlach, who repeated his warning Tuesday that U.S. stocks
are not cheap, said he holds Treasury inflation-protected
securities and gold against this economic backdrop.
Gundlach added that a short position on German 10-year bunds was
"a hell of a lot smarter than going long" the securities. As for
financial stocks, Gundlach told Reuters in an interview that he
sold his stake in bank and financial shares because "the easy
money has been made."
(Reporting by Jennifer Ablan; Editing by Chris Reese and James
Dalgleish)
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