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Dec. 2, 2016, 8:44 a.m. EST

Gundlach warns Trump trade is ‘losing steam’ and stocks have peaked

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By Victor Reklaitis, MarketWatch


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The ‘Trump Trade’ has run into headwinds.

Today’s jobs report isn’t looking like it can prevent a rate hike. That means investors are closing out the week with more head-scratching about the “Trump trade.”

The big question is whether it’s back into the cage for those animal spirits unleashed by The Donald’s election win. Maybe the wild rumpus is just getting started, suggests Josh Brown.

“If this sort of thing extends beyond the speculators in the stock market into the actual C-suites where spending and investment decisions are made, then it becomes self-fulfilling and it could actually work,” Brown writes over at his Reformed Broker blog. “If it doesn’t, well then at least we’ll have some fun in the meantime.”

Count Jeff Gundlach among those arguing that the party is over. He provides our call of the day .

“The dollar is going to go down, yields have peaked and will move sideways, stocks have peaked as well, and gold is going to go up in the short term,” the DoubleLine Capital CEO says in an interview with Reuters . “It is so late to be buying the Trump trade.”

Gundlach, who voted for Trump and predicted the GOP nominee would win, says people are expecting too much, after earlier being too gloomy.

“People were expecting markets will go down 80 percent and global depression — and now this guy is the Wizard of Oz,” the star manager says, adding that “there’s no magic here.”

Gundlach is known for savvy calls, but the “bond king” doesn’t always nail it. He predicted in mid-November that the 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.25% would not move above 2.35% , but it has hovered around 2.45% this week.

Staying on the topic of the president-elect’s effect on markets, our chart of the day shows how one of the friskiest Trump trades just lost 75% of its post-election gain.

Key market gauges

Futures for the Dow  , S&P 500 and Nasdaq-100  are dipping, as the Dow /zigman2/quotes/210598065/realtime DJIA +1.85%  eyes a small weekly gain after another record close yesterday. The S&P /zigman2/quotes/210599714/realtime SPX +1.95% and Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.55%  , on the other hand, are on track for weekly drops of roughly 1% and 3%, respectively.

Oil prices /zigman2/quotes/209723641/delayed CLF27 0.00%  are giving up a little bit of their OPEC-fueled gains, while Europe /zigman2/quotes/210599654/delayed XX:SXXP -0.78%  is significantly lower as investors worry about Italy’s referendum on Sunday. See the Market Snapshot column for the latest action.

The chart


MarketWatch, FactSet

Traders here and there are pointing out the “Trump rally” has faded for biotech stocks /zigman2/quotes/205950134/composite XBI +2.47%  .

The chart above shows how one key biotech ETF /zigman2/quotes/206189322/composite IBB +2.05%  has knifed below its 200-day moving average, a level that it had been living above since the day after Election Day. This ETF was up 12% from its Nov. 8 close as of mid-November, but it’s up just 3% as of Thursday’s close.

This can’t be helping: Allergan’s  CEO argued yesterday that Trump’s election won’t take the focus off high drug prices. (See his surprisingly readable blog post here .)

Read more: Why health-care stocks won’t get well soon

Not that every Trump trade is unraveling. Financial stocks /zigman2/quotes/209660484/composite XLF +1.90%  , for example, are still looking strong and finding buyers, Instinet’s Frank Cappelleri notes.

The quote


Reuters
Kellyanne Conway, Trump’s campaign manager, wrangled "Naked Cowboy" street performers on Monday.

“Do you think you could have just had a decent message for white, working-class voters? How about, it’s Hillary Clinton, she doesn’t connect with people?” — Kellyanne Conway, Trump’s campaign manager.

Conway was firing back at Clinton communications director Jennifer Palmieri, who had accused the winning side of appealing to white supremacists. The screaming match, as The Daily Beast put it , was far from the calm conversation that a Harvard conference was aiming for.

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