2017 Market Outlook: Just Markets Webcast Recap

Originally aired on January 10, 2017

About this Webcast Recap
On January 10, 2017, Jeffrey Gundlach, CEO of DoubleLine Capital, gave a 2017 Market Outlook presentation
titled Just Markets.
This recap is not intended to represent a complete transcript of the webcast. It is not intended as solicitation to
buy or sell securities or provide investment advice. If you are interested in hearing more of Mr. Gundlachs
views, please listen to the full version of this webcast by clicking here. You can also learn more about future
webcasts by viewing the 2017 webcast schedule at www.doubleline.com under Events.
Views and opinions expressed herein are those of the individual portfolio manager and do not necessarily reflect
the views of DoubleLine Capital LP, its affiliates, or employees.

Slide # Recap
Political Uncertainty
Political uncertainty is incredibly high. People think they know what President-Elect Trump
will do, but its not all that certain that it will be passed in totality with Republicans
controlling both houses.
Mr. Gundlach will be watching very carefully to whats happening with legislation once
President Trump takes office.
Oil
Mr. Gundlach correctly predicted that oil would rise in 2016. He expects oil will fluctuate
between mid $40s and maybe high $50s this year.
4 US Treasury Yields in 2016
UST 10YR Yields rose 15 basis points in 2015 and 17 basis points in 2016. He expects 2017
to be the third year of rising bond yields.
US Dollar (USD)
The USD has been a main focus of 2017 with many top asset management firms being
bullish. Strangely enough the USD is actually down so far in 2017.
DoubleLine became bullish on the USD in 2011 and stayed bullish all the way until the day
6 the Fed hiked rates in December of 2015. The USD tends to move in long lasting trends, and
were about eight years from 2009.
Mr. Gundlach is not a big USD bull or bear. He disagrees with the consensus view that the
USD is the best investment idea for 2017.
India Equities
Mr. Gundlach continues to be long-term bullish on Indian equities.
US Equities
DoubleLine does not share the consensus viewpoint that you should be all US in your equity
portfolio.
Mr. Gundlach believes now is a good time to peel off a little bit of your US equity holdings
and diversify your equity holdings outside the US.
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2017 Market Outlook: Just Markets Webcast Recap
Originally aired on January 10, 2017
Slide # Recap
11 Trump
Mr. Gundlach correctly predicted that Donald Trump would win the election before the
primaries.
The deterioration of children earning more than their parents, standards of living and
dispersion of wealth are some of the reasons why Mr. Gundlach believed Trump would
win the election.
Debt to GDP
Total Federal Debt to GDP is roughly 105%.
18 Fresh Faces in White House
Presidents are often greeted with a recession when they enter office during their first
year of administration. Looking back, it happened to Kennedy, Johnson, Carter, Reagan,
Bush I, Bush II and Obama.
The historical patterns would say a recession this year, but that does not seem very likely
with positive leading indicators, high CEO confidence and the 12 month moving average
of unemployment not indicating a recession.
US Conference Board Leading Economic Indicator
The US Conference Board Leading Economic Indicator year-over-year (YoY) is positive 0.7
as of 11/30/2016 and does not show a sign of recession.
This indicator can give false positives when it hits zero, but in the last couple of decades
we have not gotten a recession without it going negative.
20 CEO Confidence
The CEO Confidence Index, which measures CEO confidence in the economy one year
from now, is at its highest levels since 2014.
Mr. Gundlach believes this level being high does not offer a lot of reassurance and points
out that in 2017, right before the market tanked, it was not far from the levels we see
today.
Unemployment
Unemployment rate is currently at 4.60, below its 12-month moving average of 4.89. An
early indicator of recession when the unemployment crosses over its 12 month moving
average.
The more important indicator of recession is when the unemployment rate crosses over
26 its 36 month moving average, which isnt close, but signals a recession.
Commodity Prices (Slide 26)
Commodities remain undervalued having put in a massive multi-decade double bottom.
Mr. Gundlach recommends if you are 100% invested in financial assets it may be time to
consider peeling off a piece and adding real assets like commodities.
Gold
Mr. Gundlach has advocated a permanent position in gold since the 1990s. He is not very
bullish on gold and even more so with the Trump victory, but he sees no reason to stop
holding it as a diversifier in a portfolio.

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2017 Market Outlook: Just Markets Webcast Recap
Originally aired on January 10, 2017
Slide # Recap
30 Different Measures of Core Inflation
Inflation is clearly in an uptrend, other than Core PCE which could be argues is moving
sideways.
Core CPI, 2.10%
Core PCE, 1.65%
Cleveland Fed Median CPI, 2.51%
Atlanta Fed Sticky Core CPI, 2.72%
US PriceStats CPI
US PriceStats CPU YoY, a measure of transactions on internet sales, corroborates that
inflation is in an uptrend.
The annual rate of inflation recorded by PriceStats punched through the 2% mark for the
32 first time in two years on December 23rd and is accelerating rapidly.- State Street
Wage Growth
US Wage Growth, as measured by the Atlanta Fed, is running above 4%. This is another
inflation measure that points to inflation.
Fed 2017 Dot Plot
The Fed has been systematically reducing their prediction of where the Fed Funds would
be at by the end of 2017.
36
Going back to September of 2014 and then every quarter the dots were dropping of
where rates would be in 2017.
Barrons Roundtable Predictions in 2016
Mr. Gundlach, in January of 2016 at the Barrons Roundtable, predicted that the Fed will
not follow their dots in 2016. The second prediction he made, of course, was that Donald
Trump would win the presidency.
Interest Rates
Mr. Gundlach thinks the Fed will raise interest rates potentially two or three times in
2017, but probably not in March. It does not seem right to raise them on a new President
so quickly, so look for a June hike.
46 10-YR US Treasury Yield
Mr. Gundlach believes the 10YR UST Yield will hit 3% in 2017 and that four or five years
from now it will be at 6%.
If rates are rising, why should I own fixed income?
At DoubleLine, we are excited for interest rates to rise. 3% to 6% on the 10YR UST Yield is
not that bad because you are getting higher bond yield every year, and if you manage the
portfolio properly the return on the portfolio may not be dissimilar from what you would
have gotten if they stayed the same. In fact, it could actually lead to a higher total return
if the portfolio is managed properly.
81 Japanese Stocks
Mr. Gundlach likes the Nikkei. He thinks Abenomics are supportive and that there is
tremendous automatic buying of Japanese stocks from pension plans. He does not
believe you want to buy the Nikkei in Yen, and suggests hedging the currency risk if you
do choose to buy.

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2017 Market Outlook: Just Markets Webcast Recap
Originally aired on January 10, 2017
Slide # Recap
Q&A
As interest rates rise and inflation rise, should P/E ratios also continue to rise?
Well, absolutely not. If interest rates are rising, then P/E ratios should be falling, all
things being equal.
Credit spreads, especially high-yield, seem to be very tight. What's your assessment of risk-
reward of that?
Well, as I said, I think...you're right: corporate spreads are tight. Investment-grade
corporate bonds have a massive duration on them. So, I think a lot of the flows into those
categories are going to be challenged. The high-yield bonds will show interest rate risk in
2017. So, I wouldn't expect the same outcome for 2016.

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2017 Market Outlook: Just Markets Webcast Recap
Originally aired on January 10, 2017

Definitions
Consumer Price Index (CPI) Monthly data on changes in the prices paid by urban consumers for a representative basket of goods and
services.
Personal Consumption Expenditures (PCE) A measure of price changes in consumer goods and services. Personal consumption
expenditures consist of the actual and imputed expenditures of households; the measure includes data pertaining to durables, non-
durables and services. It is essentially a measure of goods and services targeted toward individuals and consumed by individuals.
Bloomberg Barclays Capital U.S. Treasury 10 Year Index The 10 year component of the U.S. Government index.
Nikkei 225 The Nikkei-225 Stock average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of
the Tokyo Stock Exchange.

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2017 Market Outlook: Just Markets Webcast Recap
Originally aired on January 10, 2017

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