Inflation Is Poised To Soar, 3% By June Is "Almost Certain"

Jeffrey Gundlach, founder and chairman of Los Angeles-based DoubleLine Capital sees 3%-4% inflation by June. Let's discuss the setup.

Headline Inflation Could Top 4%

Jeffrey Gundlach says Headline Inflation Could Top 4% by June.

Headline CPI inflation is almost certain to rise above 3% in June and July, according to Jeffrey Gundlach. It could even top 4%, he said, which would “really spook the bond market.”

Gundlach spoke to investors via a webcast, which he titled, “Looking Backward” The focus was on his flagship total-return fund (DBLTX).

There is no inflation in core CPI, Gundlach said, but headline inflation will increase significantly and will be greater than 3% in June and July. The Fed is aware of this and is telling the bond market it is unconcerned, according to Gundlach, and welcomes that level of inflation along with the accompanying negative interest rates. This allows the deficit to be financed with cheaper dollars, he said.

Headline CPI could even go above 4% over that time, he said, based on ISM data, which could trigger a bond selloff.

To get inflation, Gundlach said we need to give everyone a “Bellamy credit card,” which was portrayed in Looking Backward. It would essentially be a stimulus handout to Americans that must be spent over a fixed time or returned to the government.

“It’s shocking that households with $150,000 of income and three children will get $6,000 from the government,” he said, in reference to the $1.9 trillion stimulus. “This looks a lot like a monetizing experiment.”

Gundlach On Speculative Bubbles 

We are in a speculative bubble in government debt and equity valuations,” he said. If there is a collapse in stock prices, it will not be 10 or 15%, but a “large number. There will be a tremendous unwind of stock positions.”

He also stated the "VIX will hit its highest level in the next correlation and will go over 100.”

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