Treasury Secretary Steven Mnuchin must be dreaming.
So says DoubleLine Capital’s chief executive Jeffrey Gundlach, who took to Twitter with a retort to Mnuchin over a Bloomberg interview given Thursday that attempted to cool investor worries about inflationary pressures.
In the interview, Mnuchin maintained that economic policies of President Donald Trump and his administration could successfully lift the wages of the American worker without triggering overall higher inflation.
Gundlach fired off a comeback tweet.
‘Mnuchin: policies will raise wages w/out inflation. Yeah, sure. And we are going to expand the Buffalo Art Museum without making it bigger.’
A jump in average hourly earnings earlier this month has been widely blamed for a subsequent meltdown for stock markets, and inflation worries have been simmering ever since, even as stocks clawed back.
In a follow-up tweet, Gundlach went on to say that if “by miracle” wages can rise without inflation, that will be negative for corporate profits. It will be negative for bond yields and price-to-earning ratios, he said.
The yield on the 10-year Treasury note
broke out to a four-year high when the wage data hit Feb. 2 and has been darting back and forth near those highs since. It reached a fresh four-year high on Wednesday this week after minutes from the Federal Reserve’s January meeting suggested rates could rise faster than expected.
Stocks have been rallying since Trump’s election on hopes the growth-friendly policies and tax breaks from the administration will stimulate the economy. However, some analysts have raised concerns that higher wage pressure will cut into corporate profits this year.
Stock markets cheered Thursday as jobless claims came in at a 45-year low, and the unemployment rate remains at a 17-year low of 4.1%. Hence, companies may have to offer better pay to lure new employees.
In another tweet, Gundlach passed comment on how the so-called fear index, otherwise known as the CBOE Volatility Index
, still can’t get back to the lows seen when the “nutty ‘melt-up’ narrative” was dominating stocks. He put the volatility blame squarely on rising interest rates.
Gundlach has been making bearish calls on the stock market for the past year. In January, he predicted that the market’s nine-year winning streak will come to an end this year.
View more information: https://www.marketwatch.com/story/jeffrey-gundlach-trolls-treasurys-mnuchin-about-wage-inflation-in-tweetstorm-2018-02-23