GUNDLACH: The US stock market will end its historic streak of gains in 2018

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  • “My prediction for 2018 is that the S&P 500 will have a negative rate of return,” Jeffrey Gundlach, the founder of DoubleLine Capital, said during an investor webcast on Tuesday.
  • Last year marked a record ninth in a row that the S&P 500 had a positive total return.
  • Higher interest rates could soon start to hurt equities, Gundlach said.

The stock market is likely to end its record streak of positive returns this year, according to Jeffrey Gundlach, the founder of DoubleLine Funds.

Last year was the ninth in a row that the S&P 500 had a positive total return, which is a record streak that was last seen in the 1990s.

“My prediction for 2018 is that the S&P 500 will have a negative rate of return,” Gundlach said during an investor webcast on Tuesday. “It may go up 15% in the first part of the year, but I believe when it falls, it will wipe out the entire gain of the first part of the year and end with a negative sign in front of it.”

Higher interest rates are one catalyst that could drive the stock market lower, he said. If the 10-year yield rises above 2.63%, it could start to hurt equities, Gundlach said. The benchmark 10-year yield on Tuesday jumped to a 10-month high of 2.551% after the Bank of Japan trimmed its bond purchases.

Gundlach noted that the market is in an “accelerating” phase that makes it unlikely that it reverses that trend this year. “It takes time for momentum to wane, it takes time for sentiment to disperse a little bit and generally it takes earnings to start going down before you start to see something happening,” he said.

Still, this year is likely to be more interesting and “less profitable” than 2017, Gundlach said.

The S&P 500 has already zoomed past the year-end targets that two out of 14 equity strategists at major firms have.

Screen Shot 2018 01 09 at 4.52.25 PMDoubleLine Funds

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