Billionaire ‘Bond King’ Jeff Gundlach warns of stubborn inflation next year — and compares the growth-stock boom to the dot-com bubble

• Jeff Gundlach predicts inflation will remain elevated in 2022, and forecasts a steep dollar decline.
• The DoubleLine Funds chief compared the boom in growth stocks this year to the dot-com bubble.
• The investor expects the US tapering of federal stimulus to shake markets and temper economic growth.

Billionaire investor Jeff Gundlach predicted in his latest quarterly webcast that inflation will remain stubbornly high in 2022, and he compared this year’s frenzy around growth stocks to the dot-com bubble.

The DoubleLine Funds boss — whose nickname is the “Bond King” — also warned that if the Federal Reserve hikes interest rates and tapers its stimulus efforts, financial markets will be rattled and economic growth will falter.

Here are Gundlach’s 12 best quotes from the webcast, lightly edited and condensed for clarity:

1. “The stock market, and risk assets broadly, have been supported for over a decade by the Fed’s balance-sheet expansion. As we move into tapering and ultimately raising interest rates, it’s turning into rougher waters for markets.”

2. “It’s fascinating to see charts that compare the dot-com era to some of the speculative froth today, like some of these funds that invest in very go-go companies. We have basically had the same run up as dot-com stocks did in the late 1990s. Now they have clearly rolled over and are showing the magnitude of decline the dot-coms stocks had in the aftermath of the dot-com bust.”

3. “The Fed has clearly responded to movements in markets, and it will continue to defend risk assets. Money printing and money giveaways are here to stay.”

4. “The US economy is not strong. It has the appearance of being strong because of the stimulus, which has never been as extreme as it is right now.”

5. “It’s likely that we will see economic problems with just a few interest-rate hikes from the Fed. Maybe only four or eight hikes or so, maybe it’s 1% or 1.5% on the federal funds rate, that breaks the economy.”

6. “The bond market seems to be sniffing out a weaker economy coming. The yield curve is flattening at a sufficient clip that one should expect economic problems sooner rather than later. My base case is we’ll start to see trouble by the second half of 2022.”

7. “I would advise investors to keep their eyes on the high-yield bond market. It’s been a reliable canary in the coal mine for risk assets broadly.”

8. “It’s very possible that we don’t see an inflation reading below 4% at any time in 2022. There’s also a risk of 7% in the next couple of months. That would really be something to see.” — Gundlach highlighted wage growth and “off-the-charts” housing inflation as likely drivers of elevated inflation next year.

9. “My long-term view on the dollar remains strongly bearish. We’re looking at a weaker dollar in the second half of next year, maybe 2023. The dollar is going to go down, thanks to the twin-deficit problem in the US. It’s going to slip pretty mightily.” — Gundlach predicted the dollar would fall to at least a 12-year-low.

10. “When the dollar starts to go down, you’re going to see tremendous outperformance by non-US stocks. Emerging markets will be a very strong performer when that happens.”

11. “It’s remarkable how much emerging markets have been able to outperform US stocks when the time is right. All of the outperformance of US stocks in the middle of the 1990s was completely reversed over the ensuing six or eight years after the dot-com bust. That could very well happen again.”

12. “Gold is so boring. It has been shockingly stable with all of the commodity inflation and the wild ride that’s been going on in bitcoin. Gold, and silver with it, are kind of the orphans in the commodity market. The dollar being firm this year has been a cap on gold, but when it heads down, gold will go up.”