Paul Ryan said Senate, Congress and the white house are not on the same page and an major tax reform will not come any time soon.
Signals from the Federal Reserve that it could change its bond investment policy this year The minutes also showed "some participants viewed equity prices as quite high relative to standard valuation measures."
After the recent failure of the Republicans' healthcare legislation reform bill some investors had hoped this would bring President Donald Trump's tax-cutting promise closer to reality.
"It seems like it was a combination of hawkish Fed minutes, disappointment about the pace of tax reform and a pullback in crude prices" that reversed the rally, according to Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
Prominent investor Jeff Gundlach offered a bearish call on U.S. stocks on Monday at the closely followed Sohn Investment Conference in New York.
Gundlach recommended that investors short—or a bet on a fall in value—the exchange-traded SPDR S&P 500 ETF Trust SPY, -0.09% or SPY, which tracks the S&P 500 index SPX, -0.10% and invest in emerging-market equities. The DoubleLine Capital founder, known for his prowess in fixed-income securities, called out specifically a long bet in the iShares MSCI Emerging Markets ETF EEM, +1.27% Gundlach recommends that trade with 1 times leverage.
Gundlach’s call comes after the S&P 500 and Nasdaq Composite Index COMP, +0.29% managed to eke out record closes, with the Dow Jones Industrial Average DJIA, -0.17% ending near break-even levels.
“The valuation of emerging markets is half the valuation of the S&P 500 when you look at things like price to sales, price to book,” said Gundlach in an interview with CNBC after his Sohn presentation. Gundlach said a strong dollar has underpinned weakness in emerging-market equities but said the dollar’s strength has tapered lately and may not strengthen significantly, even as the Federal Reserve embarks upon a path of monetary-policy tightening.
A stronger dollar DXY, -0.12% can make dollar-denominated debts more expensive for EM countries, weighing on the value of assets, including equities.
Gundlach also cited the rapid ascent of passive investing, or funds that track an index, as pushing U.S. ETFs like SPY higher. He is expecting that trend to reverse and decried reports heralding the demise of active management, where investment pros have a hand in selecting securities in a portfolio.
So far this year, the iShares MSCI Emerging Markets ETF is up nearly 15%, while the SPY has a gain of 7.2%. The Nasdaq Composite has climbed 13.4% year to date and the Dow is returning 6.4% so far this year.
Last year, among others, Gundlach’s big call was predicting a victory for Donald Trump in the presidential election race—a bold call that turned out to eerily prescient.
Gundlach also made his debut on social media, launching a Twitter account just before Sohn kicked off. A spokesman, Loren Fleckenstein, told MarketWatch via email that the account was kicked “to point out when journalists publish errors or deliberate errors (lies) about [DoubleLine]”
Jeff Gundlach said Monday he has a pair trade betting on further gains for emerging markets and against U.S. stocks.
Gundlach said he is long the iShares MSCI Emerging Markets ETF and short the SPDR S&P 500 ETF specifically.
The CEO and chief investment officer at DoubleLine Capital was speaking from the Sohn investment conference in New York.
In an eclectic presentation that meandered from philosopher Friedrich Nietzsche to early 20th century art to the misnomer of "passive" investing, Gundlach came around to the notion that emerging markets likely will be outperforming the U.S.
Should that happen, it also has other investing implications, he said.
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