Aniket Pujari(Bloomberg) — DoubleLine Capital’s Jeffrey Sherman has a word of advice for bond investors trying to navigate tariff threats and economic worries: now is not the time to take big swings.
It is still unclear how consumers and the labor markets will respond to the higher inflation that could come as President Donald Trump raises levies on US trading partners, Sherman said on the sidelines of the Exchange conference in Las Vegas. Until there’s greater clarity, he is leaning into shorter-duration, higher-quality credit after “de-risking” last month.
“I think being a little defensive right now is the right thing,” said Sherman, the deputy chief investment officer at DoubleLine, which had $92 billion in assets under management at the end of 2024. “I think now is the time to rethink things, and I don’t think it’s the time to be an extreme risk-taker.”
“Guess what? If you leave a little money on the table, it’s not a big deal. We’ve made a lot of money in the the last two years,” he added.
President Donald Trump’s rapidly changing approach to tariffs has sent 10-year Treasury yields as high as 4.8% and as low as 4.1% this year, with traders vacillating between concerns about slower economic growth and higher inflation. That volatility has rippled out to corporate debt, leading to wider spreads on both investment grade and high yield bonds after they mostly ground tighter over the past year.
Sherman is favoring fixed-income sectors that should be more insulated from the tariff threats, such as energy and technology. On the flip side, he’s avoiding healthcare, which looks “pretty dangerous” given how reliant the industry is on government contracts, which Trump has been cutting. He estimates that fair value for 10-year Treasury yields is likely 4.5%, versus about 4.3% currently.
“We’re just going to have to see how the consumer responds and how the labor market responds to all of this, and no one knows right now,” Sherman said. “And when you don’t know, you don’t make a big bet. Just try to keep it in the fairway.”
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