Last Tuesday, Jeff Gundlach unveiled his latest trade: Go short the Japanese yen and long the Japanese stock market.
One week in, it’s already in the money.
Here’s a one week look at the Japanese yen against the dollar (the short) via Bloomberg:
And here’s the Nikkei (the long) via Bloomberg:
Tonight, the yen is getting smashed and the Nikkei is surging in the wake of a landslide election win for Shinzo Abe, who ran on the platform that he would push more easy monetary policy in an effort to stimulate the economy.
During last week’s webcast to DoubleLine Funds clients, Gundlach argued that Japan would pursue aggressive currency debasement, which would mean inflation.
He provided 9 charts that supported his view on this trade.
Japan has a positive real interest rate (unlike the US) which gives them room to pursue more easy monetary policy
All things considered, Gundlach believes there's a big opportunity if you go short the yen and long the Nikkei
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