“The reason the markets aren’t going lower is people are holding and hoping. The market bottoms out when people are selling and sold out — not when they are holding and hoping. I don’t think you’ve seen real selling in risk assets broadly. Markets need buying to go up and they need volume to go up. They can fall just on gravity.”
DoubleLine Capital co-founder Jeffrey Gundlach warned after the weak jobs number on Friday that the US equity market as well as other risk markets including high-yield “junk” bonds face another round of selling pressure.
“People are acting like everything is great. Junk bonds are at a four-year low. Emerging markets are at a six-year low and commodities are at a multi-year low — same level as in 1995 … GDP is not growing at a nominal basis. … Clearly what’s happening is people are waking up to the idea that global growth is not what they thought it was.”
Even International Monetary Fund Managing Director Christine Lagarde affirmed this, Gundlach said: “You talk about an important moment when somebody who is traditionally a cheerleader for a bright future says, ‘I have to downgrade my global growth forecast,’ as Lagarde did.”
— Excerpt contributed by Jason Kelly
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