Donald Trump will win the US presidential election and his ascension to the White House would cause a global growth scare that would create new buying opportunities, according to Jeffrey Gundlach.
The bond star and founder of DoubleLine Capital has repeatedly stated over the past couple of weeks that the Republican front-runner will be the next president of the United States.
On Thursday, he told an assembled audience at a New York investment panel session, which also featured market commentator Jim Grant who pens the Grant's Interest Rate Observer journal, what this would mean for markets.
'Trump is going to win and is going to raise the deficit,' said Gundlach. 'People are now focused on his protectionist leaning. First you're going to get a global growth scare. Then he says he's going to get jobs back from Mexico and from Asia. If that happens it could be an excellent buying opportunity.'
'If that's what happens it could stimulate growth temporarily and give [Trump] a mirage of success.'
The Los Angeles-based manager of the DoubleLine Total Return fund and the Nordea 1 - US Total Return Bond fund also gave his view of the Fed and of fears that it could join European and Japanese central banks in entering negative rates territory.
'I don't believe the US will go to negative rates. The reason I think they won't go to negative rates is the evidence is strongly compelling that there not having the desired effect. So far neither region has seen any positive growth or rise in inflation on the back of the move, he said.
'Negative interest rates are the definition of deflation. They mean it to be inflationary but it's deflationary. I think the EU and Japan are so blind to what's happening that they'll go more negative. Trying to fight deflation with deflation is like trying to put your burning house out with gasoline.'
He fellow panellists Jim Grant seemed to share his view on the Fed: 'I would not say never will the Fed go to negative rates. It's not probability though.'
During the panel session Gundlach also gave his view on gold, having said in the past that every investor should have some gold exposure in his portfolio. 'I'm long the miners and for once I'm making money on it. 'We're up about 75% on the senior miners,' he said, referring to some of the large cap mining companies.'
He caveated this point saying he was nervous about some of these gold miners as they have seen a lot of high ranking executive personnel changes in recent months. Gundalach said, over the next three to five years the average bond portfolio will return 3-4%. 'If it is well run it might be around 6%' he added.