Gundlach on hard or soft landing: 'In either case, you need an umbrella'

Yahoo Finance Executive Editor Brian Sozzi sat down in an exclusive interview with Jeffrey Gundlach on February 22, 2023.

Video Transcript

BRIAN SOZZI: Should investors start to be preparing for a hard economic landing?

JEFFREY GUNDLACH: We've been preparing at DoubleLine gradualistically. So I always say, don't listen to what I say, look at what I do. And we started de-risking, if you will, at the end-- fourth quarter of 2021. And what I mean by "de-risking" is increasing Treasury exposure, decreasing incrementally. We don't do this all in one day, credit exposure. And when we get maturities on lower-tier credit, we reinvest at a higher tier. So we've been upgrading our portfolio systematically.

We entered 2022 with one of our lowest interest rate risks of all time, particularly relative to a passive index. And we ended the year almost at the same interest rate risk as the index, which is an increase for us and some of our funds of about four years of interest rate risk, which is called "duration." So we started the year at about 2.25 on our biggest fund and we ended the year at about 6 and we've extended again last week.

So we've been upgrading in the Treasury market and increasing Treasuries. And this is in preparation for-- it doesn't matter if it's a soft landing or a hard landing. It doesn't matter. People are always asking me this question, how bad the recession is going to be? It doesn't matter. As long as we're going into a recession, you have to have certain degree of protection.

It won't matter-- if it's raining a half an inch an hour, you need an umbrella. If it's raining two inches an hour, you still need an umbrella. In either case, you need an umbrella. And so I think that needs to happen. The really interesting question when asked what the big risks are is, what is it that investors think they know, people who have a lot of experience like me, that we think we know, because we've been around in my case for 40 years, that might not really be-- you think you know it, but it's not true?