(Kitco News) It’s too early to jump on the crypto bandwagon as more rate hikes are yet to come, said Jeffrey Gundlach, CEO of DoubleLine.
“I definitely wouldn’t be a buyer today,” Gundlach told CNBC on the sidelines of the Future Proof wealth conference on Tuesday.
The volatility and uncertainty that Gundlach was referring to was on full display after the latest round of hotter than expected inflation data from the US sent stock markets and Bitcoin crashing.
Wall Street had its worst day since June 2020 on Tuesday, and Bitcoin fell around 10% in response to August’s annual CPI at 8.3% vs. 8.1% expected.
After hitting new all-time highs of $69,000 in November 2021, Bitcoin fell below $18,000 over the summer and last traded at $20,228.08, down 70%. from its historic highs.
The time to return to the crypto space would be when the Federal Reserve abandons rate hikes and begins its “free money” policy, Gundlach explained.
Since March, the Fed has raised rates aggressively via oversized increases of 75 and 50 basis points to keep inflation in check.
At the upcoming September meeting, markets are pricing in a 70% chance of another 75 basis point rate hike, while another 30% are looking for a 100 basis point hike, according to the CME FedWatch Tool.
“I think you buy crypto when they release money again,” Gundlach said when discussing Fed policies and recession fears. “You need a real Fed pivot,” not “dreams” of a monetary policy pivot, he added.
Fed policy error?
Gundlach also warned of a potential monetary policy mistake as the Fed runs away with rate hikes, slowing the economy too much to fight inflation.
Even though DoubleLine’s CEO is forecasting a 75 basis point hike at next week’s September meeting, he would prefer a much smaller increase of just 25 basis points. Using many oversized rate hikes in a row without a break could have unintended consequences, Gundlach warned.
“The debate over whether or not the US is in a recession is tedious and irrelevant. It is undeniable and undeniable that the US is experiencing stagflation,” he tweeted in August.
The debate over whether or not the United States is in a recession is tedious and irrelevant. It is undeniable that the United States is experiencing stagflation.
— Jeffrey Gundlach (@TruthGundlach) August 2, 2022
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