DoubleLine Minutes

Markets Price for Higher Term Premia (E216)

DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough survey a rough week for stocks and bonds ended May 23, 2025. Those losses followed the May 16 announcement of Moody’s downgrade of the U.S. to Aa1 from Aaa on the rating agency’s outlook for the federal deficit to rise to nearly 9% of GDP by 2035 from 6.4% in 2024. Eric and Mark begin with a dive into fixed income markets (0:30), which saw Treasury yields rise on the long end of the curve. The yield on the long bond Wednesday through Friday closed above previous resistance of 5.00%. “With these concerning fiscal deficits, investors seem to expect more of a term premium,” Eric Dhall notes. “I think that’s the reason for higher rates on the long end of the Treasury curve – as we’ve been saying for a long time at DoubleLine.”
 
Every sector of the S&P 500 ended the week (9:18) in the red, led by energy as speculators considered the possibility of crude oil production increases by Saudi Arabia in the wake of closed-door meetings by President Trump with leaders of that country as well as Qatar and the United Arab Emirates. Notwithstanding the week’s losses, Eric Dhall notes that all these sectors remained in the green on a month-to-date basis. Commodities (11:47) were up, led by precious metals but also supported by gains in copper, considered a macro bellwether.
 
For the week’s macro news (13:00), Mark Kimbrough observes a weak Leading Economic Indicator report and an uptrend in continuing jobless claims. However, he also points to “decent expansions” in the S&P Global U.S. PMI manufacturing and services surveys for May 12-21, the first survey period since the Trump administration paused tariffs. For the week ahead (17:40), Eric and Mark will have on their radar the OPEC+ meeting, durable goods orders, the Conference Board’s consumer confidence report, the second estimate of first quarter GDP, personal income and spending, and the PCE index.

Yield Curve Control Waiting in the Wings? (E215)

DoubleLine Portfolio Manager Jeff Mayberry and Fixed Income Allocation Strategist Ryan Kimmel chart the powerful market reactions for the week ended May 16 surrounding Monday’s joint decision by Washington and Beijing to move from trade war to trade détente. Stocks (0:34) rallied broadly across all sectors of the S&P 500 except for a light decline in health care. As rates moved higher across the Treasury curve (4:05), traditional investment grade sectors in fixed income posted negative returns while emerging markets debt led in the winners’ circle. Commodities (6:03) declined with industrial metals and livestock diverging higher. On the macro front (7:23), markets welcomed a raft of reports including April consumer and producer prices and PCE-input import prices showing inflation moving in the right direction.
 
For their Topic of the Week (17:51), Jeff and Ryan delve into the implications for markets, in particular, for the U.S. dollar and other currencies, if the Federal Reserve were to engage in yield curve control as a means to manage the government’s ballooning debt service on the national debt. Among other aspects of this question, they examine the rare historical precedents of yield curve control by the Bank of Japan (2016-2023) and the Federal Reserve (1942-51). The latter case, however, was a mechanism to assist Washington in funding the Second World War and afterward persisted during the first years of Bretton Wood foreign exchange regime. Under Bretton Woods, the dollar was set to an exchange of $35 per ounce of gold with the currencies of America’s trading partners tied to the dollar – a vastly different world than today’s regime of free-floating fiat currencies.

Fed Between a Rock and a Hard Place (E214)

DoubleLine Portfolio Managers Jeff Mayberry and Eric Dhall discuss the week ended May 9, including a mixed bag for stocks (0:55), rates up across the board in fixed income (2:59) and commodities (4:12) largely up with the notable exception of agricultural products. Bitcoin (5:17) crossed back above $100,000. On the macro front, ISM services for April came in at 51.6, much better than the consensus estimate of 50.2. No surprise, the U.S. trade deficit for March worsened to -$140.5 billion as importers moved to front-run the imposition of tariffs by President Trump. 
 
For the Topic of the Week (8:23), Jeff and Eric covered Federal Reserve Chairman Jerome Powell’s news conference following the Federal Open Market Committee’s well anticipated decision to stand pat on monetary policy. The upshot from FOMC guidance and Powell’s press comments was the Fed, while seeing elevated risks to its mandates for price stability and full employment, does not know how tariffs and trade negotiations will play out in the economy. Jeff Mayberry suspects that if push comes to shove, the Fed likely will prioritize inflation fighting over full employment. Topping Jeff and Eric’s calendar for the week of May 12-16 (13:12) will be April consumer price index on Tuesday.

Stock Vol Just a Bad Dream to Rip van Winkle (E213)

DoubleLine Portfolio Manager Eric Dhall and Fixed Income Asset Allocation Strategist Ryan Kimmel (0:22) review markets and macro through the week ended May 2. “If you were a Rip van Winkle investor who went to sleep March 31 and woke up today, what would you find?” After the tariff-unleashed sell-offs, Eric notes Rip would find equities up across the major indices. Rates (4:97) moving higher farther out the yield curve led to lower returns in most of the fixed income universe for the month with bright spots being high yield corporates and bank loans. Commodities (6:57) were down more than 4% from March 31 through May 2, led by energy down 14%, with precious metals being the bright spot, up 6%, and gold up 3%.
Economic data (8:47) for the week, Ryan notes, “took more of a front stage compared to previous weeks that were dominated by tariffs.” Among those prints, he covers the JOLTS report, with weaker-than-expected job openings reported for March and a healthy balance between job openings and total unemployed workers. Consumer confidence has deteriorated due to concerns about tariffs. ISM manufacturing shows more contraction into recessionary territory. On a positive note, nonfarm payrolls showed improvement amid abating wage growth.
Looking to the week ahead (21:11), topping Eric and Ryan’s calendar will be the Federal Open Market Committee meeting Wednesday May 7 and Fed Chair Jerome H. Powell’s news conference. The futures markets have priced in only a 3% probability of a cut to the target federal funds rate. The news conference promises to be more interesting. “Everybody is going to be watching Jay Powell to see how he tap-dances around the questions that he’s going to get regarding his job.”

Headline Fatigue or Just Normal Fatigue? (E212)

DoubleLine Portfolio Manager Jeff Mayberry and Fixed Income Asset Allocation Strategist Ryan Kimmel recap the markets for the week of April 21-25, noting how the post-April 2 volatility has made it seem like a very long month. Equities (0:53) were up on the week, with the trade stories of 2024 on growth, value and tech putting in an appearance. The bond market (2:21) had a pretty quiet week while the Agg continued to have a pretty good run in the new year. Commodities (3:33) were flat. Jeff and Ryan note that the markets seemed to dodge another volatile week after President Donald Trump walked back his calls for removal of the Fed chair. Over in Macro Land (7:54), they look at mixed April prelim manufacturing and services PMI numbers, consistent initial jobless claims and a consumer sentiment score that is usually only seen in crises. The week in Fedspeak (15:48) had a pair of Fed governors each addressing a side of the agency’s inflation-employment mandate. Next week (18:34) will bring prints including JOLTS numbers, a Q1 GDP estimate (very low) and inflation data.

Relative Recumbence Post-Tariff Turbulence (E211)

DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough review (0:05) the abbreviated market week ended April 17. It was a week characterized by lessened price volatility than in the first two weeks of the month and somewhat positive macro prints. As stocks ended lower (0:48), value stocks and the equal-weighted S&P 500 posted gains, diverging from declines for growth stocks and the market-cap-weighted S&P 500. Fixed income (2:00) had a positive week in high yield corporates and emerging markets as well as the investment grade, government and government-guaranteed sectors. Commodities (3:00) caught a bounce.
 
On the macro front (4:39), Eric and Mark walked through import prices, retail sales and industrial data, finding some positive news in the readings, but they cautioned to wait for May data, given the as-yet unclear adjustments under way in response to Trump administration trade policies and reactions from U.S. trading partners. Looking to the week ahead (14:24), among other reports, Eric and Mark will be on the lookout for the Leading Economic Index (Monday), S&P Global manufacturing and services (Wednesday) and durable goods orders (Thursday).

More Turbulence Post “Liberation” or “Obliteration” Day (E210)

DoubleLine Portfolio Manager Jeff Mayberry and Fixed Income Asset Allocation Strategist Ryan Kimmel April 11, 2025, look into the extraordinary intra-week turbulence (0:48) behind a moderate weekly gain in the S&P 500, an almost no-place-to-hide week for bonds (4:41) and commodities (9:57) showing weakening demand in industrial inputs as WTI crude pierced intraweek below $56/barrel.
 
Overwhelmed by tariff-driven sentiment in the wake of Liberation or Obliteration Day, the markets paid little attention to the week’s backward-looking macro prints (11:24), including constructive March reports for the consumer and producer price indexes. For their review of the week’s Fed Speak (20:23), Jeff and Ryan single out comments on Thursday by Federal Reserve Bank of Chicago President Austan Goolsbee. In a fireside chat hosted by the Economic Club of New York, Goolsbee said tariffs risk “a stagflationary shock.” This complicates the Fed’s achievement of both its full employment and price stability mandates. “There’s not a generic playbook,” Goolsbee said, “for how a central bank should respond to a stagflationary shock.”
 
The abbreviated April 14-17 market week (22:44) appears to be relatively quiet in terms of scheduled macro news. Jeff and Ryan will be on the lookout for import prices (Tuesday) and retail sales and industrial production (Wednesday).

The Cruelest Month – for Risk Assets (E209)

Lifting a line from T.S. Eliot, DoubleLine Portfolio Manager Eric Dhall surveys a cruel start to April for stocks (0:23) and other risk assets, as shock over Washington-imposed tariffs and fears of a trade war sent the broad equity market into a correction and tech into bear land. The sharp worsening in growth outlooks also erased most of commodities’ gains YTD (2: 07). Prices on WTI and Brent crude plunging below resistance levels the “double whammy” of worsening growth expectations and the stunning decision of OPEC+ to triple oil production relative to increase expectations. The resulting flight to safety (8:29) rewarded investors in high-grade fixed income securities with price gains in U.S. Treasuries, Agency mortgage-backed securities and investment grade corporate bonds. Analyst Mark Kimbrough (13:04) goes through the week’s macro data, including unemployment readings for March that might have buoyed risk markets, but for forward-looking macro fears swamping the backward-looking data prints.
 
Turning to the Federal Reserve (24:51), Eric Dhall notes Fed Chairman Jerome Powell is in a tough spot. The markets want four fed funds cuts this year, but Powell faces prospects of both labor deterioration and higher inflation. “I think the Fed is going to sit on its hands in May,” Eric says, “and not do anything knee-jerk unless we get some really massive data prints.” Among the data prints for the week of April 7(33:00), Mark Kimbrough will be on the lookout for the Fed’s report on consumer credit borrowing (Monday), the NFIB small business optimism report (Tuesday), the March consumer price index (Thursday) and March producer price index (Friday).

Equities a Bit of a Bloodbath as Shift on Trade, Tariffs Looms (E208)

DoubleLine Portfolio Manager Eric Dhall and Fixed Income Asset Allocation Strategist Ryan Kimmel recap the week of March 24-28, with markets reacting to new macro prints and a tariff regime scheduled to be unveiled by the White House on April 2, which President Donald Trump has dubbed “Liberation Day.” Stocks were down, roiled by tariff talk; bonds were no place to hide (2:11); gold continued to shine, flirting with crossing the $3,100 mark (3:30); and commodities were up, lifted by precious metals (3:49). Over in Macro Land (5:56), the week included a PMI mixed bag, manufacturing contractionary/services expansionary; the Conference Board Consumer Confidence Index for March, with outlook deteriorating (6:53); an upside surprise in durable goods orders (7:55); and the week closed with a sticky PCE inflation number that raises questions about interest rate cuts (9:23). Friday also delivered the University of Michigan Consumer Sentiment Index, which expresses a lot of anxiety about recession risk and inflation levels (14:34). Next week will bring Liberation Day, and a possible reordering of the global trade regime, as well as Friday’s jobs report (16:40).

Uncertainty Makes Sense (E207)

DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough cover the week ended March 21 in stocks and fixed income, then turn to a macro picture characterized by “kind of bearish” retail sales, fast-growing manufacturing, recessionary warnings from the “broken clock” that has been the Leading Economic Index and an uncertain Fed.
 
With the futures market pricing in three cuts to the fed funds rate in 2025, Eric Dhall cautions against that expectation. Fed officials, he says, seem “befuddled,” with Fed Chair Jerome Powell at his March 19 news conference repeatedly invoking the “uncertainty” of current economic landscape. Mr. Dhall notes a decline in the doves in the FOMC’s dot plot even as FOMC members were expecting economic growth to slow. Mark Kimbrough agrees, saying, “Uncertainty makes sense. Uncertainty, is the new buzzword” at the Fed. “They’re trying to look through the impacts of these tariffs, but they don’t know.”
 
Looking ahead to the March 24-28 week, Eric and Mark will be on the lookout for S&P Global PMI readings, S&P CoreLogic Case-Shiller house price indexes, Conference Board consumer confidence and the Fed’s preferred inflation gauge, Personal Consumption Expenditures.