Stocks may have held a record rally in April, but DoubleLine Capital’s Jeffrey Gundlach says it’s likely we’ll see the market fall to its March low again.
“I’m certainly in the camp that we are not out of the woods,” Gundlach said this week. “I think a retest of the low is very plausible. I think we’d take out the low.”
And the so-called “bond king” isn’t the only one waiting for stocks to retest those lows. According to a poll by UBS Global Wealth Management of investors and business owners with at least $1 million in investable assets or in annual revenue, 61% are waiting for equities to fall between 5% and 20% before buying again.
Gundlach, for his part, has initiated a short position against the market.
“Actually, I did just put a short on the S&P at 2,863,” Gundlach said. “At this level, I think the upside and downside is very poor. I don’t think it could make it to 3,000, but it could. I think downside easily to the lows or beyond… I’m not nearly where I was in February when I was very, very short.”
The DoubleLine CEO closed his previous short positions on March 18, tweeting “the profits were just too great not to harvest, and the panic is palpable.”
Since its March 23 low, the S&P 500 has gained 30% and has stabilized just under the 3,000 level. But Gundlach thinks the jobs market is a warning signal for the market.
As states begin loosening social distancing guidelines and allowing businesses to reopen, Gundlach says investors are too optimistic about the economic recovery that may follow the coronavirus shutdown.
“People don’t understand the magnitude of… the social unease at least that’s going to happen when” 30 million people have lost their jobs, Gundlach continued. “We’ve lost every single job that we created since the bottom in 2009.”