Gundlach Predicts Secular Dollar Decline, Favors International Stocks
DoubleLine Capital CEO Jeffrey Gundlach, known as the “New Bond King,” declared Tuesday that the dollar’s downward trajectory will persist for years, creating compelling opportunities in global markets. During a live investor webcast, Gundlach urged market participants to rotate out of US equities and into international exposures, calling this strategy “clearly going to work.”
Structural Dollar Weakness Emerges
Gundlach emphasized he sees the dollar entering a “long-term decline” phase, predicting foreign stock markets will continue outperforming their American counterparts. The $95 billion asset manager highlighted a potential “double benefit” for investors using depreciating dollars to purchase foreign equities, particularly if international markets continue their upward march.
This outlook aligns with the dollar’s 2025 weakness, driven by President Trump’s aggressive trade policies that have eroded confidence in US assets and prompted reassessments of the greenback’s dominance in global trade. The ICE Dollar Index has fallen approximately 8% year-to-date.
Strategic Emerging Market Allocation
Gundlach specifically singled out emerging markets as particularly attractive:
- India remains his top long-term pick
- Southeast Asian nations show strong potential
- Mexico and broader Latin America offer compelling opportunities
The portfolio manager noted foreign investors might reduce US allocations due to escalating geopolitical tensions, creating additional tailwinds for international markets. “If this reverses, we could see massive selling pressure – that’s precisely why I advocate for non-US equities,” he explained.
Gundlach’s bearish US stance stems from multiple recession indicators flashing warning signs, despite his expectation that the Fed will maintain interest rates at its upcoming meeting due to persistent low inflation (currently ~3% by year-end projection, though tariff policy uncertainty complicates forecasting).
Wall Street’s Emerging Market Rally Call
Gundlach’s view reflects growing consensus among major banks:
Morgan Stanley & JPMorgan Chase forecast further dollar weakening from potential Fed rate cuts, slowing US growth, and ongoing fiscal/trade policy uncertainty – all expected to accelerate capital flows to developing economies.
Bank of America Securities projects double-digit returns for emerging market assets this year, with strategist Michael Hartnett declaring:
“A weakening dollar, peaking Treasury yields, and China’s recovery create the most favorable emerging markets backdrop we’ve seen.”
The bank’s strategists went further, predicting an emerging markets bull market driven by:
- Continued dollar depreciation
- Peak US interest rates
- Reviving Chinese economic momentum
This coordinated shift in sentiment marks a significant reversal from recent years’ dollar strength, with portfolio managers now positioning for what could become a multi-year rotation into undervalued international assets.
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