Known to many as the ‘bond king’ – DoubleLine Capital’s founder and CEO – Jeff Gundlach – is well known for his contrarian calls. This week on CNBC he made the comment that he feels that we will look back at Sept 2024 and say “this was the start of the 2024/25 recession”. If Gundlach is correct – the recession has already hit the US economy. Therefore, this would imply the jumbo sized cut from the Fed this week is already too late – and will do very little to course correct a rapidly slowing economy (especially given the 9-12 month lag effect of monetary policy).
Employment
Actionable market insights delivered to your inbox weekly
When Bad News is Bad News
Last weekend I questioned whether markets could break out to the upside; or perform what trader’s refer to as a “back and fill”. My best guess was the latter. In turns out, things traded ‘per the script’, where the S&P 500 suffered its worst week since March 2023 – giving back 4.20%. The Nasdaq fared far worse – shedding ~6% – led by large losses in popular AI chip stocks. So why are market’s worried? It’s concerns about growth. With a market trading close to ~22x forward earnings – expecting YoY EPS growth of 11% — that’s not consistent with ‘slowdown’ scenario.
It Wouldn’t be September Without a Few Bumps
September has started in a very typical September fashion. Down! It’s traditionally the worst month of the year in terms of returns. But that’s not a bad thing… As longer-term investors – it’s great when things go on sale. That’s when we get to sharpen our pencils on higher quality businesses. And for those who missed out four weeks ago (where you needed to act fast) – it’s possible you will get another chance this month. As I wrote recently – the rapid 10% surge in equities over 4 weeks did not fill me with a lot of confidence…