Sohn Conference

Jeff Gundlach makes bets against U.S. stocks, for emerging markets

Gundlach: Passive investing doesn't exist

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Jeff Gundlach said Monday he has a pair trade betting on further gains for emerging markets and against U.S. stocks.

Gundlach said he is long the iShares MSCI Emerging Markets ETF and short the SPDR S&P 500 ETF specifically.

The CEO and chief investment officer at DoubleLine Capital was speaking from the Sohn investment conference in New York.

In an eclectic presentation that meandered from philosopher Friedrich Nietzsche to early 20th century art to the misnomer of "passive" investing, Gundlach came around to the notion that emerging markets likely will be outperforming the U.S.

Should that happen, it also has other investing implications, he said.

Gundlach: Now the time to buy emerging markets

"When emerging markets outperform the S&P 500, active is outperforming the S&P 500," he said.

That phenomenon would reverse years of underperformance of active managers against the basic stock index. For 2016, only about 19 percent large-cap managers topped the S&P 500, according to Bank of America Merrill Lynch.

However, Gundlach said passive investing ultimately is a myth in that managers still are deciding which stocks are included in indexes. He encouraged investors to take index funds and "throw them out the window."

Gundlach's pick comes a year after he rocked the conference with the ultimately accurate prediction that Donald Trump, who was winding up a heated primary battle at the time, eventually would win the presidency.

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Gundlach: Passive investing doesn't exist