DoubleLine CEO Jeffrey Gundlach said on Wednesday that his very best investment idea for the new year is commodities, against the background of increasing global economic activity and the valuation beauty of commodities relative to U.S. stocks.
“I believe investors should add products for their portfolios,” said Gundlach on CNBC, pointing to the “remarkable” inverse relationship between the total return of their Samp;P 500 and the Samp;P Goldman Sachs Commodity Index.
“You go into these substantial cycles,” he said. “The repetition of this is almost eerie. And so if you look at that graph the value in commodities is, historically, exactly where you want it to be a purchase.”
Mr. Gundlach noted that commodities are equally as cheap relative to stocks since they were at turning points in prior cycles that started in the 1970s and 1990s. The Samp;P Goldman Sachs Commodity Index is up 5 percent this year, compared to the Samp;P 500’s 19-per-cent gain.
Basics are also at play in commodities, Mr. Gundlach said. He pointed out that international economic activity is rising, a tax cut could boost growth and the European Central Bank is implementing “absurd” stimulative policies in the euro zone. “I mean, GDP in Europe. . .Germany is higher than the U.S. for the final year-over-year in nominal terms,” he said.