Long before any serious people really thought it was possible, Jeff Gundlach had Donald Trump ticketed for the White House. Since then, however, his crystal marital aid seems to have lost its predictive power. He said Trump’s election would cause stocks to slump. Then he said the Trump rally was on its last legs before the man was even inaugurated. He said the spring failure to repeal Obamacare meant that Trump and his G.O.P. frenemies on Capitol Hill would never get anything big done.
Now, however, the man of many enthusiasms is back to weigh in on the big thing that Trump & co. did get done. He is not impressed, noting that “it’s hard to give credit to the president’s policies” for the stock-market surge which wasn’t all that impressive anyway. And where he once eagerly awaited a wave of deficit spending from the White House, he’s now unhappy with where the deficit increases are going to come from.
I see a narrative change. I see the budget deficit starting to become a very significant problem as we move into the later part of 2018. I think the tax package is far from revenue-neutral, I think the budget deficit is going to something like double for fiscal ‘19 versus what we had for fiscal ’17, and I think that’s going to be an important part of market psychology moving forward….
I think equities are going to have a lot more volatility later in the year than they had in 2017. I think they’ll open the year strong—they already have—but I do think that higher interest rates will start to be a drag and will take the stock market to a negative performance for 2018 in the United States.