According to Jeffrey Gundlach, the founder and manager of DoubleLine Capital, the mammoth $150 billion investment firm, we were actually late in beginning to play defense this summer.
Note his remarkable timing leading into and coming out of the last major downturn (although he no doubt lagged for quite some time during 2007): emphasis mine…
“The U.S. is “battling tooth and nail the next recession,” Gundlach told Yahoo Finance in an exclusive wide-ranging sit-down. “The Fed has done, and the central banks, everything they can to avert the next recession. But a recession will come.”
After Gundlach successfully played defense in 2007 and 2008, he went on offense in 2009 and put capital to work in the beaten-down mortgage bond sector and reaped the benefits.
“[When] the opportunity comes, you’ll want dry powder to pounce on it,” he said. Gundlach emphasized investors need to be playing defense now, just like investors should have done so in 2006.
“I think playing defense is early. You probably should’ve started playing defense in 2018. And the fact that 2019 has been really good is just a better reason to play defense.””
Of course the market action from early November on says we were early. Actually, in our view, we were neither early nor late; we have a process (as, clearly, Gundlach does as well) that dictates our stance, independent of the near-term movement of stock prices. I.e., in our view, we got defensive precisely when conditions dictated.