NEW YORK (Reuters) – Jeffrey Gundlach, chief executive of DoubleLine Capital, on Monday said the S&P 500 stock index is headed to new lows and that U.S. equities are in a long-term bear market.
FILE PHOTO: Jeffrey Gundlach, CEO of DoubleLine Capital, speaks during the Sohn Investment Conference in New York City, U.S., May 8, 2017. REUTERS/Brendan McDermid/File Photo
Gundlach, speaking on CNBC TV, said passive investing has reached “mania status” and will exacerbate market problems.
“I think it is a bear market. I think we’ve had the first leg down and the second leg down is usually more painful than the first leg down,” said Gundlach, who oversees more than $123 billion.
“I think this lasts a long time. It has a lot to do with the fact that, I believe, that we’re in a situation that is … highly unusual – that we’re increasing the budget deficit so spectacularly so late in the cycle while the Fed is hiking interest rates.”
The S&P 500 briefly erased its losses in late-morning trade on Monday but resumed its steep decline and pierced through Gundlach’s target after he made his “bear market” comments.
The intraday low for the year in the S&P was on Feb. 9, when it bottomed at 2532.69. The low close for the year was on April 2 at 2581.88. On Monday, the S&P closed 2545.94.
Investors are also bracing for the Federal Reserve’s last rate decision of the year on Wednesday, when they are expected to raise U.S. interest rates for a fourth time for 2018.