Gundlach, who oversees around $147 billion of assets under
management, said in an investor webcast that he only sees a 35%
chance of a U.S. recession in 2020, but believes that when a
downturn does hit, the weaker dollar will drive foreign
investors out of U.S. corporate debt.
Low yields globally have pushed investors into riskier assets
and led to the ballooning of BBB-rated credit, the lowest
possible investment-grade rating. The decline in quality of U.S.
credit poses the biggest risk to bond investors today, said
Gundlach.
Gundlach said he expects the Treasury yield curve to steepen in
the coming year, with the two-year yield anchored by a pause in
the Federal Reserve's interest-rate cuts. He does not expect
further rate cuts in the first half of 2020.
A 2020 electoral victory for U.S. President Donald Trump is
DoubleLine's base case scenario, said Gundlach, in part because
of the weakness of the Democratic party's candidates for office.
(Reporting by Kate Duguid; Editing by Sandra Maler)
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