DoubleLine’s Gundlach says to buy international stocks on the dollar's 'secular decline'

DoubleLine Capital CEO Jeffrey Gundlach is advising investors to favor international stocks over U.S. equities, citing the beginning of a secular decline in the U.S. dollar and potential benefits from a weaker dollar boosting returns for dollar-based investors in foreign markets. Gundlach highlighted India and certain Southeast Asian countries as attractive emerging market opportunities, while also noting that geopolitical tensions could further drive foreign capital away from U.S. assets. He anticipates the Federal Reserve will hold steady on interest rates at its next meeting and projects year-end inflation around 3%, despite uncertainties surrounding Trump's tariff policies.

Analysis

Jeffrey Gundlach, CEO of DoubleLine Capital, which managed approximately $95 billion at the end of 2024, posits that international equities are set to continue outperforming U.S. stocks, primarily driven by what he identifies as the beginning of a secular decline in the U.S. dollar. He argues that dollar-based investors allocating to foreign stocks could experience a 'double barreled wind' if the U.S. dollar depreciates against foreign currencies while international equities simultaneously outperform. The U.S. dollar has already demonstrated weakness in 2025, with the ICE U.S. Dollar Index falling approximately 8% year-to-date, a trend Gundlach attributes to President Trump's aggressive trade policies negatively impacting sentiment towards U.S. assets and prompting a reevaluation of the dollar's global dominance. Gundlach specifically highlights India as a compelling long-term investment within emerging markets, alongside opportunities in certain Southeast Asian nations, Mexico, and Latin America. He further suggests that heightened geopolitical tensions might deter foreign capital inflows into the U.S., potentially leading to selling pressure on U.S. stocks and creating an additional tailwind for international markets. This perspective aligns with Gundlach's broader caution regarding the U.S. markets and economy, where he observes several recession indicators are 'blinking red.' Regarding monetary policy, he anticipates the Federal Reserve will maintain current interest rates at its upcoming meeting, despite prevailing 'quite low' inflation, and projects year-end 2025 inflation to reach roughly 3%, though acknowledges that President Trump's tariff policies introduce significant uncertainty to this forecast.

Key Decisions for Investors

• Investors should consider re-evaluating their U.S. equity exposure in favor of international markets, particularly emerging markets such as India, select Southeast Asian countries, and Latin America, to potentially capitalize on U.S. dollar weakness and relative equity outperformance.
• It is crucial to monitor U.S. dollar movements, ongoing trade policy developments, and geopolitical risk, as these are key drivers of the articulated investment thesis and present significant risks to U.S. asset valuations.
• Given the stated concerns about the U.S. economy and the potential for a secular dollar decline, investors might consider adopting a more defensive posture or implementing hedging strategies for their U.S. holdings.
• The outlook for stable Federal Reserve policy alongside an inflation forecast of roughly 3% by year-end 2025 should be incorporated into broader asset allocation models, particularly for interest-rate sensitive investments.