Gundlach Says Volatility `Genie' May Not Be Back in Its Bottle

(Bloomberg) -- The VIX may not be sending an all-clear sign for the markets, according to Jeffrey Gundlach.

The markets are at an “important crossroads,” Gundlach, the billionaire bond manager who is chief executive officer of DoubleLine Capital, said in the Twitter message late Friday. But he also asked, is the “genie back in the bottle? I’m skeptical.”

The Cboe Volatility Index’s 11 percent drop to 14.64 means it ended Friday’s session below the highest close of last year, 16.04 on Aug. 10. This year has been a different story, of course, with the gauge soaring above 50 in intraday trading during the market meltdown in early February.

While stocks did suffer amid that bout of volatility, they’ve also recovered quickly despite concerns ranging from the effect of President Donald Trump’s tariffs to the potential interest-rate-hike path of the Federal Reserve. The S&P 500 is back above its 50-day moving average, and technology stocks have returned to record levels. Still, it remains to be seen if equities can continue to climb the so-called “wall of worry.”

In January, during his annual “Just Markets” webcast, Gundlach said that a level of 3 percent on the 10-year U.S. Treasury yield would signal the end of the three-decade long bond bull market. It hasn’t broken through that level yet, though has come close, rising above 2.95 percent on Feb. 21. He also said commodities will outperform in 2018 amid a late-cycle boom.

To contact the reporter on this story: Joanna Ossinger in New York at jossinger@bloomberg.net.

To contact the editors responsible for this story: Tracy Alloway at talloway@bloomberg.net, Kenneth Pringle, Ros Krasny

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