Jeffrey Gundlach spoke at The 10th Annual Strategic Investment Conference on the topic of why own bonds at all (see Kyle Bass full speech here). When asked that question, “Why own bonds?” at a time when many investors are assuming that historically low interest rates are poised to start rising, Jeffrey Gundlach has a blunt response: “Just because bond yields are low doesn’t mean they’re going to rise anytime soon.”
The CEO and CIO of fixed-income specialist DoubleLine Capital contends that the quantitative easing driving down yields “is not going away.” In the US, for example, QE will continue until the Federal Reserve sees evidence of negative effects from the program, Gundlach says. But to this point, he adds, Federal Reserve Chairman Ben Bernanke has seen “no negative consequences.”
Against such a backdrop, he believes it’s unlikely that yields will go up—in fact, Gundlach adds, they may even go lower. In such an environment, bonds can and should remain a core component in an investor’s portfolio.