The last time we checked in on “bond king” for the post-Gross world, tanker of markets at lunchtime and man whose Twitter account wasn’t hacked after all, Jeff Gundlach, he had discovered “the most recessionary signal” yet in the spread between the Conference Board’s Present Situation Index and the Expectations gauge.
That was – checks notes – Tuesday.
Fast forward to Thursday and Jeff is out weighing in on Wednesday’s Fed meeting, via a “phone interview” with Reuters that he definitively didn’t initiate in order to make sure his name was all over the financial press today (“believe me”).
As is custom, Gundlach had exactly nothing new to offer, instead opting for his tried and true strategy of basically reading to you from yesterday’s news wire stories.
“He’s caving to the stock market”, Gundlach said of Jerome Powell, adding that “the stock market scared him.”
Incisive analysis, to be sure.
But Jeff wasn’t done “truth”ing. Not by a long shot. He went on to make some “bold” predictions about what comes next for the balance sheet runoff plan. To wit:
Even though they won’t say so, this shows that Quantitative Tightening will be slowed down. And if need be, the Fed will expand the balance sheet. QE is the ‘unnamed’ other policy tool he referenced in case lowering the Fed funds rate proves not to be enough to strengthen the economy/markets.
Yes, “even though they won’t say so”, the Fed may have to tweak the pace of balance sheet runoff.
This is the kind of inside information that only Jeff has, or if “inside information” isn’t the right way to characterize it, let’s just say that nobody – nobody, I tell you – besides Gundlach could have divined that the Fed might ultimately slow down the pace of QT based solely on what the committee said in the special statement issued on Wednesday which, you’re reminded, reads as follows:
The Committee is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments.
Again, you have to be Jeff Gundlach to read between the lines there. There is absolutely no way that a mere mortal would read that sentence and think “the Fed might adjust the pace of balance sheet normalization depending on how the outlook evolves.”
It’s also incredible that Jeff was able to read the statement and determine that QE is still in the toolbox. Here is what the statement says:
Moreover, the Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.
See what I mean? Other than the fact that the Fed explicitly says “we are prepared to alter the size of the balance sheet if future economic conditions were to warrant a more accommodative monetary policy”, there wouldn’t be any way to know that they are prepared to alter the size of the balance sheet if future economic conditions were to warrant a more accommodative monetary policy. Well, there wouldn’t be any way to know that were it not for Jeff Gundlach, who was generous enough to re-read the statement to Reuters.
At that point, Reuters should have just hung up on Jeff, but they humored him (figuratively and literally) for more and here’s what he had to say about Powell himself:
Powell is basically saying, I am going back into a foxhole and then decide what the next move is. Powell said ‘I dont want to say anything and I don’t want to get pinned down as I did before.’ Because it got embarrassing.
Right. And Jeff is a guy who knows all about how continuing to talk when you aren’t making any sense has the potential to “get embarrassing.” To wit:
The only difference between Jeff and Jay is that Jeff doesn’t know when it’s time to “go back into a foxhole.”