Gundlach said 2019 will continue to be a volatile year. He said he expects higher yields will hurt stocks in a “tug of war.”
The stock market will be in a push-pull with rates expectations going forward. Gundlach highlighted the difference between the Federal Reserve’s tightening agenda reflected in its dot plot and the bond market’s expectations.
Market-implied rate hike odds have fallen after Fed Chair Jerome Powell recently said the central bank “will be patient” with monetary policy as it monitors the economy.
Gundlach was spot-on with his call on the massive sell-off at the end of 2018. In mid-December, Gundlach predicted that the S&P 500 would go lower when it had already fallen 11 percent from its intraday all-time high, saying “I’m pretty sure this is a bear market.” His call came true a week later on Christmas Eve, when the index dipped into bear market territory briefly, tumbling more than 20 percent from its record high on an intraday basis.
The market has since bounced back with the S&P 500 up 2 percent in the new year, driven by the optimism over US-China trade talks.