Jeff Gundlach: “Things Are Going To Get Pretty Scary”
Specifically, he said that central banks are “out of control” because they don’t understand the consequences of their own policies. On CNBC’s “Halftime Report“, the DoubleLine bond guru projected that markets are likely to see another round of negative interest rates before central bankers realize they aren’t working and that fiscal stimulus may be the better option. “The policies that they’re implementing don’t have the consequences that they’re looking for,” he said.
Gundlach pointed out the chart which we said back in 2010 is the only one that matters: the S&P’s liquidity “flow” manifested by the Fed’s balance sheet overlaid on top of the Fed’s balance sheet:
He said that “it’s really uncanny how the S&P500 rallied when they were doing QE and expanding their balance sheet, and how the S&P never goes anywhere when they stopped expanding their balance sheet. They stopped QE3 back in December of 2014 and the S&P500, the DJIA, the Nasdaq are all exactly the same when they stopped expanding their balance sheet. The S&P has been dead money for 18 months.”
That – once again – resolves the whole “flow vs stock” debate.
So what went wrong? According to Gundlach, chief among central bank mistakes was negative rates.
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