September 12, 2017 / 9:36 PM / a year ago

Gundlach: Equity investors to see 'first change in dynamic' with QE reversing

NEW YORK, Sept 12 (Reuters) - Investors in equities and risk assets should brace themselves for the end of quantitative easing, given the high correlation it has to high stock and junk bond prices, Jeffrey Gundlach, chief executive at DoubleLine Capital, warned on a webcast Tuesday.

Equity and risk-asset investors are “unfortunately about to see the first change in dynamic in years” with the end of QE, Gundlach said. In September, the Federal Reserve is expected to begin to reverse the process of quantitative easing, QE, whereas interest payments and principal from maturing securities will no longer be reinvested in the bond market. This is known colloquially as “balance sheet reduction,” because as the bonds and MBS mature, the asset side of the Fed’s balance sheet will shrink. (Reporting By Jennifer Ablan; editing by Diane Craft)

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