Jeffrey Gundlach, CEO of DoubleLine Capital, believes the Federal Reserve will raise interest rates one more time before its tightening cycle ends. “I think one more,” Gundlach said Wednesday on CNBC’s “Closing Bell: Overtime.” “I think it’s tough to make the statement ‘ongoing increases’ with an ‘s’ at the end of the word ‘increase’ and do zero unless you had very substantial change in economic conditions.” The Federal Reserve raised its benchmark interest rate by a quarter percentage point on Wednesday, taking its target range to 4.5%-4.75%, the highest level since October 2007. The Fed’s statement included language noting that the central bank still sees the need for “ongoing increases in the target range.”
The so-called bond king said that Fed Chairman Jerome Powell made a “clarifying” statement at the press conference on Wednesday, saying real yields are positive across the curve. Gundlach said he was referring to Treasury Inflation-Protected Securities (TIPS), whose yields have stopped their ascent. “He’s looking at the TIPS market, which had a huge increase in yields last year. That was a major headwind for risk assets in the stock market,” Gundlach said. “They’ve stopped going up and I have a feeling that real yields are going to not go up in the first part of this year. So that keeps a little bit of runway, I think.” Stocks staged a big comeback in January, led by beaten-down technology names. The S&P 50 rallied 6.2% in January, notching its best start of the year since 2019. The tech-heavy Nasdaq Composite jumped 10.7% last month for its best monthly performance since July.
