Although U.S. equities markets are signaling that a strong dollar may not be a good thing, the currency will keep getting stronger, according to one investing pro.
DoubleLine CEO and CIO Jeffrey Gundlach said during a Tuesday afternoon webcast about the firm's total return fund that it seems the dollar accelerating to the upside is now seen as a negative for stocks. The greenback has been a "world beater," and will continue to be until its strength becomes unsustainable, he said.
"Everybody's bullish on the dollar now," he said, explaining that his portfolio does not own any euros. While a contrarian trade would call for shorting the U.S. currency, Gundlach advised against this, saying he believed that the consensus was likely correct.
"Currency trends go on for a very long time," he said, adding that the dollar has shown not much indication that it is ready for a correction.
He recommended staying out of the euro for everyone who is not a day trader.
Addressing Federal Reserve policy, Gundlach said that the central bank will not raise rates if deflationary pressures persist.
"I do think that inflation is not a problem," he said.
He warned that the Fed might regret raising interest rates if it does so before the middle of the year, and could even end up reversing its policy.
Turning to commodities, Gundlach said that gold will be supported by negative bond yields, and will likely make it up to $1,400 this year. He took a bearish tone on oil, however, saying that it would dip below its recent lows.
"I still think oil is going to see a minor new low," he said. "I really don't believe oil is going to start rallying."
Crude will not go all the way down to something like $10, and could even close the year higher than it is now, but it will see a dip below $43 per barrel before that time, Gundlach explained. (U.S. oil traded at about $48.70 on Tuesday afternoon)
As for global equities, the investor said he continues to like India for the long term.
DoubleLine's total return fund is "less short now" on U.S. bonds than it was at the beginning of January he said. The U.S. bond market is like 2004-2006, he said, because the Fed is looking to raise rates, and previously long rates had been stable or even falling. If the central bank does move for a rate increase, the long end of the yield curve will be pleased, he said.
DoubleLine's main fund quadrupled its high-yield junk bond holdings, he added.
Gundlach reiterated that he is bearish on "old school" car companies, citing firms like Uber that could cut into new car sales.
"I think that the long-term future of monoline auto manufacturers, particularly old school, it doesn't look very good," he said.