Gundlach: Stocks or Bonds? The Choice Right Now Is Clear he fixed income market is โvery cheapโ now compared to the stock market, offering solid returns and upside potential with limited downside risk, Jeffrey Gundlach said Wednesday. โI think this is the time you want to have a barbell portfolio with some risk assets, primarily in bonds,โ the CEO of DoubleLine Capital, a bond-focused investment firm, said on CNBCโs โClosing Bell.โ While Gundlach previously suggested a portfolio comprising 30% stocks, 60% bonds and 10% real assets โ such as gold โ he now recommends an allocation of 20% stocks, 60% bonds and 20% real assets, he said. Investors can reach 5% returns in a โvery high-grade bond portfolioโ with no default risk, and 8% to 10% in a โwell-positioned, actively managed fixed income portfolioโ that takes the โmiddle part of the capital structure,โ Gundlach said. The billionaire investor said heโs sticking with a game plan that involves systematic upgrading in fixed income portfolios, adding that this is the โperfect timeโ to do so as the stock market has rebounded. โYou can get all these yields and you can have all this upside,โ he said. At current valuations, bond investors could achieve greater upside than the stock market, and the downside canโt be worse, Gundlach said. The only possible pitfall would be a massive default problem, but if that occurs, stocks would fall more than 50%, he suggested. Fixed income right now has four times the stock marketโs payout, according to Gundlach, who suggested using long-term Treasurys as a hedge in the barbell investing strategy, which seeks to balance risk and returns by combining high- and low-risk assets. He called the current environment an exciting time for fixed income risk parity, in which investors can get yields and โmanage risk very precisely.โ Gundlach, speaking after the Federal Reserve announced for the first time in 15 months that it would not raise interest rates, also said he doesnโt expect the central bank to resume interest rate hikes.
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They wonโt be anywhere as readily available as those of corporates right? Since the likelihood of a corporate defaulting is much higher than that of a country
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Yes, so long as there are banks willing to sell, one can buy. I say banks but if you have an ISDA you can participate in the OTC derivatives/swaps mkt. Now, can you participate as an individual investor? Likely not unfortunately.
Credit default swaps Do fixed income securities of a country have a credit default swap?