A risk-off mood is setting the stage for Tuesday, with stocks skidding as Treasury yields keep reaching for the sky. Don\u2019t look to JPMorgan CEO Jamie Dimon to calm things down, as he warned that even 7% interest rates are possible.<\/p>\n
Over to bond king Jeffrey Gundlach, who in our call of the day<\/strong>, lays out his \u201cincome generating\u201d relatively risk-free portfolio to help buffer against what he sees as a looming recession. <\/p>\n The widely followed CEO, chief investment officer and founder of DoubleLine Capital, spoke to UBS for a podcast that was recorded on Sept. 19, ahead of last week\u2019s Fed meeting. At the time, Gundlach predicted that the Fed would take a wait-and-see attitude \u2014 it kept interest rates steady in a range between 5.25% and 5.5%, but flagged another hike to come, which has been a primary driver of the recent surge in yields.<\/p>\n The money manager said he sees a \u201cturning point maybe in the next six months or so where the consumer\u2026is going to be tapped out. I think they\u2019ve been borrowing too much money. I think the interest rate increases are really going to start biting both the consumer and small businesses.\u201d<\/p>\n Gundlach says \u201cthe odds of recession in the first half or the second quarter of 2024 really needs to be respected,\u201d and expects layoffs will pick up toward the end of this year and into early 2024. <\/p>\n And with recession odds \u201chigh,\u201d he said it\u2019s \u201cpretty difficult to be really fond of the valuation of the stock market.\u201d<\/p>\n So where to invest? \u201cI think investors should be getting much more conservative and I continue to favor a relatively balanced portfolio. When I say that I don\u2019t mean 60\/40, I mean maybe about 25% or 30% equities and the same quantity or slightly more bonds,\u201d he said. \u201cAnd at this point, a lot of people are using the phrase \u2018T bill and chill,\u2019 because the highest yield out there is six-month T-bills.\u201d<\/p>\n But investors are \u201cbetter off in\u2026parts of the credit market where there are yields available [of] 7% to 8%, without taking a lot of credit risk,\u201d he said.<\/p>\n Drilling down, Gundlach says he\u2019s shifted from low-quality to more high-quality bonds for around 25% of the portfolio. \u201cI would say about 25% in 10-year longer Treasury bonds, certainly because they have potential to be a ballast [for] your portfolio against some positions,\u201d he said<\/p>\n \u201cI don\u2019t recommend high-risk positions at all right now. I recommend some risk positions, so 25% longer-term Treasurys where if you have that recession coming,\u201d and that could mean gains of 30% to 50% on the 30-year bonds and half of that or so on 10-year bonds.<\/p>\n Gundlach weighs in on cash, where he differs from Bridgewater Associates\u2019 Ray Dalio who recently said cash is temporarily good and that he doesn\u2019t want to own bonds, <\/p>\n \u201cI used to say 25% cash, but now I don\u2019t think cash is where you want to be. I think it\u2019s cash-ish,\u201d he said, suggesting low-duration bonds or floating rate bank loans that can yield around 8%. \u201cYou can get income out of double B type or triple B fixed income of 7.5% \u2013 8% and sleep at night very, very well.\u201d<\/p>\n \u201cAnd then I would say 25% in stocks, and there I don\u2019t think you want the entire S&P Read: <\/strong>A handful of stocks have driven much of this year\u2019s rally. That\u2019s becoming a serious problem on the way down.<\/p>\n For stocks, he prefers value over growth, and midcap or large-cap over small-cap. And within that exposure to international stocks, just not Europe or emerging markets yet, because the latter\u2019s currencies are weak and probably won\u2019t rally until a recession hits. But he likes India for a \u201cgenerational type of a hold.\u201d<\/p>\n And then 25% into commodities, and he suggests gold or exposure to a broadly diversified commodity price index.<\/p>\n \u201cSo it\u2019s a really balanced portfolio with a lot of it being in fixed income, you know, 25% in treasuries and 25% in credit, so half of the portfolio would be income generating, and that\u2019s our portfolio. You put it together you get like 7%,\u201d said Gundlach.<\/p>\n <\/p>\n Stocks SPX<\/p>\n COMP Read: <\/strong>Oil could hit $150, sending \u2018shock through system,\u2019 says top shale CEO<\/p>\n And: <\/strong>Why a government shutdown could undercut the U.S. dollar rally<\/p>\n For more market updates plus actionable trade ideas for stocks, options and crypto,\u00a0subscribe to\u00a0MarketDiem by Investor\u2019s Business Daily.<\/strong><\/p>\n Costco Tesla shares Ford The S&P Case-Shiller home price index showed prices rising again in July, led by Chicago. New home sales are due at 10 a.m. and consumer confidence. Fed. Gov. Michelle Bowman will speak at 1:30 p.m.<\/p>\n Moody\u2019s has warned a government shutdown would be credit negative for the U.S. From the postal service to social security, here are some potential fallout scenarios. <\/p>\n The Taliban controls the world\u2019s best performing currency this quarter.<\/p>\n The world needs new antibiotics to fight superbugs, but the drugs aren\u2019t reaching people<\/p>\n Too many Americans are bad at math and it\u2019s a threat to global competitiveness, say experts.<\/p>\n Mark L. Newton, head of technical strategy at Fundstrat, says in a new note that Monday\u2019s bond yield surge \u201cshould result in a final push back to monthly lows in gold and silver. Yet, given that Treasury yields and the U.S. dollar look close to peaking out technically, this might serve as an attractive countertrend opportunity to give the precious metals a more serious look.\u201d <\/p>\n His technical gold Here\u2019s his chart:<\/p>\n <\/p>\n These were the top-searched tickers on MarketWatch as of 6 a.m.:<\/p>\n Missing for 11 years, Daisy the cat is finally home.<\/p>\n The TikTok tape-mouthing trend may be one to avoid.<\/p>\n
\n SPX
\n [so-called magnificent] seven that have driven the entire S&P year to date. They seem back in euphoria land,\u201d he said.<\/p>\nThe markets<\/h2>\n
\n DJIA<\/p>\n
\n are under pressure, as the 10-year Treasury yield
\n BX:TMUBMUSD10Y
\n hits a fresh 16-year high. Oil
\n CL.1,
\n
\n is lower, while the dollar
\n DXY
\n is off modestly. <\/p>\nThe buzz<\/h2>\n
\n COST,
\n
\n earnings are due after the close, with potential news of a membership-fee increase in the spotlight.<\/p>\n
\n TSLA,
\n
\n are under some pressure. The EV maker has emerged via an EU probe as likely having benefited from Chinese subsidies, Bloomberg reported, citing sources. Nio also emerged as another getting those subsidies, and those share also fell in premarket. <\/p>\n
\n F,
\n
\n has halted work on a $3.5 billion battery factory in Michigan, just days after making concessions to striking workers. And President President Biden is expected to join United Auto Worker picket lines on Tuesday.<\/p>\nBest of the web<\/h2>\n
The chart<\/h2>\n
\n GC00,
\n
\n target is $1,865-77, with break of $1,865 possibly leading to $1,850 \u2014 an appealing risk\/reward area, he says. If gold climbs over $1,960, that means lows are likely in place. In any case, he sees another breakdown for the metal in the next 1 to 2 weeks, though this time it\u2019s fair to see gold is \u201cclose to bottoming.\u201d <\/p>\nTop tickers<\/h2>\n
\n
\n \n Ticker<\/p>\n<\/td>\n \n Security name<\/p>\n<\/td>\n<\/tr>\n \n \n TSLA,
\n \n Tesla<\/p>\n<\/td>\n<\/tr>\n \n \n AMC,
\n \n AMC Entertainment<\/p>\n<\/td>\n<\/tr>\n \n \n NVDA,
\n \n Nvidia<\/p>\n<\/td>\n<\/tr>\n \n \n NIO,
\n \n Nio<\/p>\n<\/td>\n<\/tr>\n \n \n GME,
\n \n GameStop<\/p>\n<\/td>\n<\/tr>\n \n \n AAPL,
\n \n Apple<\/p>\n<\/td>\n<\/tr>\n \n \n MULN,
\n \n Mullen Automotive<\/p>\n<\/td>\n<\/tr>\n \n \n TTOO,
\n \n T2 Biosystems<\/p>\n<\/td>\n<\/tr>\n \n \n NKLA,
\n \n Nikola<\/p>\n<\/td>\n<\/tr>\n \n \n AMZN,
\n \n Amazon.com<\/p>\n<\/td>\n<\/tr>\n<\/table>\n Random reads<\/h2>\n