Market Overview

Jeffrey Gundlach Thinks Fed Has No Option But To Raise Rates (Even Though The Economy Isn't Yet Ready)


"King of Bonds" and founder of Doubleline Capital, Jeffrey Gundlach, spoke at CNBC's 2015 Delivering Alpha conference on Wednesday. Gundlach explained why he thinks raising rates is a compulsion for Fed and how bond investors will benefit if interest rates rise.

The Economy Is Not The Way Fed Hoped It Will Be

"If you have just been off on Mars and you came here and looked at that one chart of GDP, you would say, gosh I wonder if the Fed is going to ease," Gundlach said. "You wouldn't be talking about tightening. But the Fed really wants to get off of zero because who wants to be at zero should the economy actually go into some sort of a recessionary mode. So I can see why they want to get off of zero, but the economy just hasn't really been able to corroborate the hope that they have been showing."

Bond Investors Want Rates To Rise

Gundlach highlighted how bond investors will benefit if the interest rates go up, saying, "For many bond portfolios, like a two-year duration portfolio, you want rates to rise. If rates rise you will be reinvesting at higher rates. Even if the 10-year treasury went to 8 percent yield about eight years from now, you'll have a higher return than if the yield stayed where it is."

Negative On Homebuilders

It was also revealed by CNBC's Kate Kelly that Gundlach thinks the housing story is over and millennials are not interested in buying houses, which is why he has gone negative on homebuilders.

Posted-In: CNBC Delivering Alpha Jeffrey GundlachEconomics Federal Reserve Media


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