(Bloomberg) – Doubleline Capital’s Jeffrey Sherman has one piece of advice for bond investors trying to cope with tariff threats and economic concerns: Now isn’t the time to swing a big shot.
Sherman said in a bystander at the exchange meeting in Las Vegas that it is unclear how consumers and the labor market will respond to the higher inflation that President Donald Trump proposed to tax U.S. trading partners. Before he became clearer, he tended to have shorter efficiency, higher quality credit after “off the risk” last month.
“I think it’s the right thing to be a little defensive right now,” said Sherman, deputy chief investment officer at Doubleline, who owns $92 billion in assets by the end of 2024. “I think it’s time to rethink things, and I don’t think it’s an extreme adventurer.”
He added: “Guess what? If you leave a little money on the table, it’s no big deal. We’ve made a lot of money over the past two years.”
President Donald Trump’s rapidly changing attitude to tariffs has brought the 10-year fiscal yield to as high as 4.8% and as low as 4.1% this year, with traders raising efforts between concerns about slow economic growth and higher inflation. This volatility has touched corporate debt, with spreads on investment grade and high-yield bonds wide after much of the past year have been tighter.
Sherman prefers fixed income sectors, which should deviate more from tariff threats, such as energy and technology. He avoided health care on the other hand, which looks “very dangerous” to cut government contracts given the industry’s reliance on government contracts. He estimates that the fair value of the 10-year fiscal yield could be 4.5%, compared to about 4.3% now.
“We’re going to have to look at the consumer reactions and the labor market’s reaction to all of that, and no one knows it right now,” Sherman said. “You don’t have a big bet when you don’t know. Just try to keep it on the fairway.”
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