“The Fed should not raise rates in December. You shouldn’t have to make a case for the Fed to hike; the case should already be made,” said DoubleLine Capital founder Jeffrey Gundlach at the 2015 Inside Fixed Income conference.
Meanwhile, odds for a rate increase rose over 60% after the upbeat Friday jobs report.
The Fed’s pretended obsession with getting the job done in December makes no sense, he said, as financial conditions are worse
than they were in February 2012, when the regulator started its third
round of asset purchasing program.
In his opinion, the biggest "No" to a hike is the S&P 500
itself. The gauge has rebounded from losses in August and September, but
looks fragile "to another pushback down because earnings are not
there,” said Gundlach.
“The S&P 500’s trailing 12-month P/E is 19; that’s not cheap.”
He named a batch of other reasons such as the fact
that the implied inflation rate in bond market pricing is around zero, and the greenback looks to be on another leg higher.
“Junk bonds are signaling with clarion bells: Do not raise interest
rates,” Gundlach said. He advised investors to sell junk bonds “on
strength.”
The investment-grade bond market will begin to get hurt by downgrades if oil cannot recover above $50 a barrel, he said.
