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NEW YORK (Reuters) – DoubleLine CEO Jeffrey Gundlach said on Wednesday that his best investment idea for the new year is commodities, against the backdrop of increasing global economic activity and the valuation attractiveness of commodities relative to U.S. stocks.
“I think investors should add commodities to their portfolios,” said Gundlach on CNBC, pointing to the “remarkable” inverse relationship between the total return of the SP 500 and the SP Goldman Sachs Commodity Index.
“You go into these massive cycles,” he said. “The repetition of this is almost eerie. And so if you look at that chart the value in commodities is, historically, exactly where you want it to be a buy.”
Gundlach noted that commodities are just as cheap relative to stocks as they were at turning points in previous cycles that began in the 1970s and 1990s. The SP Goldman Sachs Commodity Index is up 5 percent this year, versus the SP 500’s 19 percent gain.
Fundamentals are also at play in commodities, Gundlach said. He pointed out that global economic activity is increasing, a tax cut could boost growth and the European Central Bank is implementing “absurd” stimulative policies in the euro zone. “I mean, GDP in Europe…Germany is higher than the U.S. for the last year-over-year in nominal terms,” he said.
Reporting By Jennifer Ablan; Editing by Chizu Nomiyama and Cynthia Osterman