Gundlach: Ditch U.S. Equities for Emerging Markets

By MarketsFOXBusiness

After a momentous run up in U.S. equities following the November election, DoubleLine Capital CEO Jeffrey Gundlach said it’s time to ditch U.S. stocks for emerging market equities.

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Pointing to U.S. stocks, which Gundlach said make up 50 percent of global valuations compared to the U.S. GDP’s 24% of global total, he said valuations on the broad S&P 500 are stretched. Because of that, he suggested shorting (a bet that stocks will fall) the SPY, the index’s exchange traded fund, and diving into EEM, an emerging markets ETF.

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Gundlach is not alone in his call: An April fund manager survey from Bank of America Merrill Lynch showed investors are fleeing U.S. stocks at a pace not seen in decades. Flows into eurozone stocks from U.S. equities saw the fifth-biggest rotation since 1999. What’s more, 44% of investors included in the survey were overweight emerging markets, the highest allocation in five years, while a record number -- 83%-- of investors saw U.S. stocks as overvalued.

A number of factors have weighed on investors’ minds including the double-digit percentage gains for U.S. equities after the election, and the odds of quick fiscal policy rollout -- including tax reform --  from the Trump administration.

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