Gundlach says the global stock market is signaling ‘something bad’ is happening

Jeffrey Gundlach believes the U.S. stock market can’t diverge from global equity markets forever.

Halftime Report” Thursday. “Well what happened as rates broke to the upside … the global stock market ex-U.S. did take a new leg down and did go to a 12-month low. And it’s interesting the S&P 500 did what I said … That is join the global stock market on the way down.”

Relative performance of S&P 500 (blue) versus Rest of World ex-U.S. (green) YTD

Source: FactSet

On Wednesday, the Dow Jones Industrial Average declined by more than 800 points and the S&P 500 fell by 3.3 percent as investors worried about the negative effects from the rising interest rate environment .

The sell-off came a day after the 10-year note yield traded above 3.25 percent hitting its highest level since 2011. This occurred about a week after Federal Reserve Chairman Jerome Powell said the central bank is a “long way” from getting rates to neutral in an interview with PBS, which pointed to a possible more aggressive path for rate hikes.

The iShares MSCI ACWI ex U.S. ETF, which tracks the performance of a rest of world ex-U.S. equity index, is down 10 percent this year through Wednesday versus the S&P 500’s 4 percent gain.

Gundlach is founder and CEO of DoubleLine. He is known for his investment acumen in the fixed income markets. DoubleLine has assets under management of more than $120 billion, according to its website.

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