By Mark DeCambre, MarketWatch
Jeffrey Gundlach on Tuesday said that the worst isn’t over for the stock market, after a brutal quarter that left the Dow with its worst decline in the first three months of a calendar year in its 124-year history.
Speaking during a webcast, the DoubleLine Capital founder said that the stock market remains “dysfunctional” from his perspective, indicating that the market may put in a more “enduring low,” once the March 23 nadir for stocks is “taken out.”
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +2.17% on March 23 finished at 18,591.93, its lowest close since Nov. 9, 2016, which left it with a pullback of more than 37% from its all-time closing high set in February. The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.23% , on the same day, ended at 2,237.40, its lowest close since Dec. 6, 2016, marking a nearly 34% pullback from its record finish.
From that point, the indexes then began a rebound that saw the Dow log its biggest three-day gain since 1931, and many strategists have speculated that the worst may be over for stocks after President Donald Trump last week signed the more-than-$2 trillion relief package and the Federal Reserve has rolled out a barrage of stimulus measures to ease gummed-up parts of the financial market.
Gundlach speculated that the market could slide lower still. “I would bet that will get taken out,” he said, referencing the March nadir.
A day after the March low, the DoubleLine CEO speculated that the S&P 500 could jump to 2,700 before the coronavirus relief package was signed into law.
The S&P 500 hit an intraday March 24 peak at 2,637.01, but has mostly been retreating since then.
At the beginning of March, the Los Angeles bond-fund manager offered what turned out to be sage advice, recommending that investors stay in cash during the coronavirus pandemic.
He advised investors back then to pay attention to the economic data that will reveal the damage wrought by COVID-19, which has so far caused a near-global shutdown as governments across the world attempt to mitigate the spread of the deadly infection, which has been contracted by more than 850,000 people and killed 42,000 so far, according to data compiled by Johns Hopkins University .
Gundlach said watching the direction of weekly U.S. jobless claims data, along with consumer confidence, could be helpful in seeing how households — the linchpin of the economy — are holding up.
Weekly jobless claims reported on Thursday were the worst in history, surging to 3.28 million people seeking unemployment benefits.
On Tuesday, Trump attempted to underscore to Americans that the road ahead will be a tough one, noting that we are facing a “very, very painful two weeks,” during a daily coronavirus news briefing. “This is going to be a rough two-week period,” the president said.
On Tuesday, stocks, slammed by uncertainty surrounding the illness, ended sharply lower, with the Dow marking its worst quarterly performance since 1987, the S&P 500 index marking its sharpest quarterly fall since 2008 and the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.17% notching its worst quarterly slide since the fourth quarter of 2018.