Jeffrey Gundlach: The Fed’s Waterbed Problem | UBS On-Air

DoubleLine CEO-CIO Jeffrey Gundlach joins UBS’s Solita Marcelli the day after a sharp global bond sell-off to discuss yields, deficits, AI-related borrowing and the Federal Reserve. He argues yields are rising across developed markets, credit is beginning to tier, and the Fed faces a tug-of-war between inflation and interest expense. He also says he has turned defensive on valuation and prefers equal-weighted to cap-weighted equity exposure.

1. Gundlach sees yields rising across the developed world, including Japan, driven by deficit-related issuance and AI-related borrowing.
2. He says credit is starting to tier, with some AI issuers’ bonds trading like junk despite investment grade ratings.
3. He doubts inflation will fall as far as the FOMC projects and expects more hikes rather than cuts.
4. He remains conservative on duration and credit, believes we are past peak AI, and expects the next recession to blow out the deficit and send the U.S. dollar sharply lower.