If bond investor Jeffrey Gundlach were to grade Jerome Powell, he'd give the Federal Reserve Chairman a “C-” — arguably slightly better than the grade he’d receive from President Donald Trump, his fiercest critic.
In a wide-ranging exclusive interview with Yahoo Finance, the CEO of $150 billion DoubleLine Capital explained that one of the main frustrations investors have had with the Fed lately is its inconsistent messaging.
"Every press conference from basically December until about June was a completely different message from the one before,” Gundlach told Yahoo Finance. “And they were getting increasingly dovish. And then he kind of went all-in on dovishness, and started to follow the bond market and cut rates."
The 60-year-old billionaire analogized Powell's behavior to "an NFL coach after losing a game."
He added that the heads of losing teams "all say the same thing, 'Got to watch the tape, got to play better, not good enough.' Now Jay Powell does the same sort of boilerplate. He just says, 'data-dependent, don't know we're going to do, we might.' He basically wants to say as little as possible."
He went on to describe the Fed as "rudderless" and "shamelessly following the bond market [more] than ever before."
He noted that the Fed has pretty much always followed the bond market, except during the Paul Volcker era, when the then-Fed chief was indifferent to the message of the market.
"So at this point, I'm afraid I would have to give Powell a pretty low grade. I'd give him a C- because of the fact that he's really kind of lost his way as it appears."
Gundlach went on to add that Powell "seems to be leading the way for kind of cheerleading inflation higher, which is probably one of the reasons why bond yields have risen kind of globally and in the United States as well."
Trump, of course, has routinely savaged Powell — and reportedly entertained the idea of firing him last year. Yet Gundlach said the only thing holding him back from giving the Fed chief a lower grade, such as a D or D-, is that Powell has pushed back against the idea of negative rates — something Trump embraces.
"[I] strongly and loudly applaud his statement that he doesn't think we should take interest rates negative in the United States,” he told Yahoo Finance.
“Because if the United States went negative with Japan negative and with Europe negative, I think it would be fatal to the global banking system. Because there'd be nowhere for capital to go," he added.