DoubleLine Round Table Prime: Lessons of 2024, Ideas for 2025

In the final segment of this Round Table Prime, the panelists discuss lessons learned from 2024 and their investment ideas for 2025. Participating are DoubleLine CEO Jeffrey Gundlach and as moderator DoubleLine Deputy Chief Investment Officer Jeffrey Sherman with their “returning champions” James Bianco, President and Macro Strategist at Bianco Research; Danielle DiMartino Booth, Founder and Strategist of Quill Intelligence; Charles Payne, CEO-Founder of Wall Street Strategies and Fox Business Anchor; and David Rosenberg, Founder and President of economic consultancy Rosenberg Research & Associates. This panel was held Jan. 9 at DoubleLine’s downtown L.A. office.
Highlights from Lessons Learned:
(1:05) Household spending behavior, Mr. Rosenberg says, has changed. Consumers spent all the $2 trillion in stimulus checks issued in 2021. “The household sector traditionally would save half and spend half. But they spent all of it. … You’re not going to buy patio furniture twice in the same week, but the money kept on getting spent. The economy reopened, people went on Carnival Cruise, and people spent on fun and experience.”
(13:07) Macro vs. Markets: Ms. DiMartino Booth sees “many signposts” the U.S. entered recession in 2024. However, she reminds herself to be humble in extrapolating investment decisions from fundamentals. “It doesn’t matter if I’m correct on my fundamental macroeconomic call, if the momentum and the narrative are against it. You have to respect positioning, you have to respect technicals, and you have to respect a narrative when it’s as deeply entrenched as it is with the biggest players in the market.”
(16:39): The Monster of Momentum: Given U.S. financial markets are undergoing “a gambling culture that would make the Chinese blush,” Mr. Bianco says 2024 should drive home a respect for momentum. Investors and traders “are so driven by momentum in gambling, every trend is going to go way further than I ever think it’s going to go - in both directions.”
(22:12) Fed Chair Jerome H. Powell as Mr. Magoo: After being late to raise rates, missing the durability of inflation, then being slow to lower rates, Powell seemed, in Mr. Gundlach’s eyes, to have finally “sobered up and was getting more thoughtful,” by his Sept. 18, 2024, news conference. At Powell’s Dec. 18 news conference, Mr. Gundlach learned “that I was giving Jay Powell too much credit. The guy is really at heart Mr. Magoo. He can’t see very well. He’s got that jalopy and crashes into dumpsters and stuff.”
Highlights from Investment Ideas:
(7:25) Mr. Rosenberg is “bullish on Treasuries. I think the economy is going to be weak. I think that demand growth will slow much faster than the prevailing supply growth in the economy. Inflation is going to come way down and surprise everybody.”
(11:17) Mr. Payne advises investors to consider Starbucks and shares three stock picks in the energy sector, including a manufacturer of mini nuclear power plants.
(14:18) Seeing a U.S. economy already in recession, Ms. Booth says. “My highest conviction call is that the Fed is going to be forced to lower rates probably four or five times this year.” She makes her case for shorting consumer packaged goods makers, certain regional banks, China and Brazil.
(19:59) Passive vs. Active Investing? For Mr. Bianco, the answer depends on the asset class. “The data shows that it is very difficult for an active manager to beat a benchmark in the equity market. … But the active passive data in fixed income is very different. The index usually comes in around the 50th percentile, not the 95th percentile like it does in equities.” Mr. Bianco advises investors hire competent active managers for fixed income and passive investing ideas for equities.
(23:41): Asset Allocation: For coming opportunities, Jeffrey Gundlach suggests 25% in cash, not restricted to Treasury bills but also invested in lower-duration, high-quality fixed income. Further out the yield curve, he would put 40% in intermediate-term fixed income and 10% in long Treasuries. However, long Treasuries should have “the lowest coupon possible” as “crash protection” against a government debt restructuring. He likes certain parts of Agency mortgage-backed securities and commercial mortgage-backed securities, the S&P 500 Equal Weight Index, nuclear power electricity generation, uranium production and a 5% long-term investment in iShares MSCI India ETF (INDA).