DoubleLine Capital CEO Jeffrey Gundlach said the best way to navigate the extreme volatility in financial markets right now is to sell into equity rallies, particularly when the S & P 500 reaches a certain level. “The optimal strategy is to reduce risk on strength,” Gundlach said on CNBC’s ” Closing Bell ” Monday. “The markets are so volatile, so much movement that it’s almost impossible to sell on weakness. The markets just go from a mineshaft type of decline and that’s true in the credit markets and I think it’s true in other risk assets as well.” Volatility exploded in recent weeks amid an ongoing global banking crisis as well as shifting expectations for monetary policies. The S & P 500 is now on a three-day winning streak, but Treasury yields rebounded dramatically Monday, putting pressure on technology names. “When I say volatility, it usually means down. We’re in a hiatus here,” Gundlach said. He believes if the S & P 500 rises to the range between 4,200 and 4,300, it would be a good place for investors to sell. The large-cap equity benchmark is still in the green for the month, trading around 3,983 on Monday. .SPX YTD mountain S & P 500, YTD “I think stocks going up to 4,200, 4,300 is once again, an opportunity to reduce risk and that would go along with probably a decent opportunity to reduce lower tiers of credit risk,” Gundlach said. “I’m really negative on lower credit quality bank loans.” The widely followed investor also said there’s a more than 50% chance that the Federal Reserve is done with rate hikes in light of the banking chaos. The central bank raised rates by a quarter percentage point last week, while signaling just one more increase ahead for 2023. Gundlach also stood by his call for recession, saying a downturn will be upon us in a few months.
