DoubleLine’s Gundlach Warns Fed’s ‘Higher for Longer’ Stance is Problematic, According to Reuters

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The Federal Reserve’s commitment to maintaining high interest rates for an extended period has become a significant challenge, with the economy beginning to show troubling signs, according to Jeff Gundlach, Chief Executive Officer of DoubleLine Capital.

Gundlach commented that the current situation is problematic, observing that the stock market is already reacting notably, compounded by rising bond yields. He made these remarks at an event held by the investment management firm in New York City.

On Tuesday, yields on 10-year Treasury notes reached 4.806%, while 30-year bonds climbed to 4.950%, marking the highest levels since 2007. Gundlach warned that if the 10-year yield exceeds 5%, which is not far off, it could create “sticker shock” for investors.

The increase in Treasury yields had a negative impact on major stock indexes. The index closed at its lowest point since June 1, and the Dow fell into negative territory for the year for the first time since June, ending at its lowest level since May 31. Similarly, the Nasdaq also reached its lowest point since May 31.

Gundlach advised that it is prudent to anticipate some economic weakness in the first half of the following year, and he predicts a likelihood of rate cuts in that same timeframe.