The Two Questions that Matter Most

Two questions stand out amid the complexity of the current economic and market environment, according to Jeffrey Gundlach, both of which relate to critical elements of fiscal and monetary policy and should guide portfolio construction for investors.

Gundlach, who is the founder and chief investment officer of DoubleLine funds, spoke to investors in a conference call last Tuesday. The title of his talk was the “The Decline and Fall of the Roman Empire.” The US economy, he said, is on a path that bears alarming similarities to the one that befell the Romans in the fifth century.

Gundlach’s two questions were when the Fed will increase interest rates and what effect the end of fiscal stimulus measures will have on the economy. I’ll return to why he said those questions are critical to investor’s decisions, but first let’s look at Gundlach’s parallels between the US today and the Romans a millennium-and-a-half ago.

Republicrats and perpetual dictators

The Roman Empire was founded in 44 BC, when Julius Caesar was appointed as a “perpetual dictator.” Gundlach said that reminded him of what is currently going on in Washington, DC. Read more......