Bond Kind Jeffrey Gundlach predicted stocks would end the year negative due to pressure from rising yields on government debt. In addition, the DoubleLine Capital founder said bitcoin has been a leading indicator for the market's direction, with its slump a bad omen for equities.
"We're in a volatility regime that is completely, obviously different from what we experienced in 2017. It's payback time" Gundlach told CNBC's "Halftime Report". "2017 was the easiest investment year of all time. The risk-adjusted returns for the stock market were probably the best in history"
I included Gundlach's comments above primarily on his comments in BOLD. No wonder it truly was - everyone can testify that it had been a superb run in the last half of 2017 with hardly any pullback- the exuberance was one of a kind. If we continue to hold these market darlings of yesteryear, we should remember that all that exuberance would probably not return and returning to previous heights would be a tall ask; in reality in greater likelihood, the downward price adjustment is continuously in motion in the days and weeks ahead to remove remaining sp overvaluation as the market returns to normality with PE & Price/Sales (Mcap/Revenue) ratio contraction in bearish environment. This is the new normal we have to adjust as the party is well and truly over.
As Hamish Douglass CEO of Magellan wrote
Investors in this environment could well take some sage advice from Warren Buffett in Berkshire Hathaway’s annual report for 2000:
"The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behaviour akin to that of Cinderella at the ball … but they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands
