DoubleLine Capital’s Jeff Gundlach has become one of the most visible critics of market complacency, revealing his purchase buy five- and eight-month S&P 500 put options. Now, the legendary bond investor is touting his bet on a spike in equity market volatility as one of his “highest conviction” trades, according to an interview with Bloomberg. "Volatility is about to go up," he said. "That’s my highest-conviction trade right now."
As a result, Gundlach, who does not anticipated a crash (yet), says his fund is quietly moving toward the exits on riskier assets, which is also his recommendation to traders.
“I don’t see the big drop, unless there’s something out of left field, like some sort of really escalating conflict,” he said. “I think you’re supposed to be gradualistically moving toward the exits.”
Speaking to Erik Shatzker, Gundlach says he’s reducing DoubleLine’s positions in junk bonds and EM debt and moving to safer high-yield credits. With US equities looking increasingly overvalued with each successive all-time high, Gundlach says being defensively positioned is worth sacrificing a few quarters of higher returns....