In his latest contrarian comments to Reuters, Jeff Gundlach focused on the recent flipflopping by the Fed and its various speakers who are now positioning the market for an imminent rate hike despite the US economy still treading water, and said that while many Fed officials are “dying to raise rates,” but all that matters is Janet Yellen’s opinion, a glimpse of which we will get as soon as this Friday when she speaks at Harvard. “All that matters is Yellen. She is still there.”
Last week, New York Federal Reserve President William Dudley said the U.S. economy could be strong enough to warrant an interest rate increase in June or July, reinforcing the drum beat from within the Fed in recent days that rate increases are coming soon. A range of policymakers with normally varying views on monetary policy are now stating a rate increase is possible at the next policy meeting in June.
Further, he noted something many have suggested, namely that sentiment from late 2015 has returned, when the market was optimistic that just because the Fed is hiking that some surprising surge in the US economy is on deck: both the Fed and the market were wrong: “I feel like we are back in December again, where everyone thinks that there is a super secret that some Fed officials have this knowledge that the economy is really good.”
There was no super secret and in fact, the Fed was proven very wrong when the market tumbled shortly after the hike.
As a result, he said on Tuesday that the rally in U.S. stocks, which began on Monday, feels like a short squeeze and characterized U.S. stocks as “dead money.“
His sentiment echos that of not only Goldman, which recently unveiled a surprising warning hinting a drop back to 1850 is in the cards, but also that of Bank of America which last night said that “we are seeing the same decoupling between US and EM stocks that that turned out a leading indicator in Aug and again in Jan.“
Gundlach has been generally bearish on stocks in recent months as the market has gone largely nowhere. It remains to be seen if central banks will allow him to be right, and when.
via http://ift.tt/1OMOXS7 Tyler Durden