Expect a steeper yield curve, according to Jeffrey Gundlach. Investors should be “defensive” with respect to long-term bonds. Gold will go up, inflation will be subdued, there is a 30% to 35% chance of recession and – his “highest conviction” idea – the dollar will weaken. His most surprising prediction, though, was that Bernie Sanders will emerge as the likely Democratic nominee, which he said is also the biggest risk facing the market in 2020.

“Don't expect returns on stocks or bonds to come anywhere close in 2020 to where we're in 2019,” he said.

Gundlach is the founder and chief investment officer of Los Angeles-based DoubleLine Capital, a leading provider of fixed-income mutual funds and ETFs. He spoke to investors via a conference call on January 7. Slides from that presentation are available here. This webinar was his annual forecast for the global markets and economies for 2020.

Before we look more closely at his 2020 predictions, let’s review his forecasts from a year ago.

His most prominent prediction was that 2019 would mark the start of a period when the bond market would have to reckon with the rising federal deficit and liabilities from Social Security and other entitlements and that the cost of financing that debt would rise. In fairness, though, he also predicted that the 10-year yield would decrease in 2019. Interest rates went down last year, with the benchmark 10-year Treasury yield declining by 74 basis points, from 2.66% to 1.92%. (correct)

Gundlach predicted that a recession was unlikely in 2019. (correct) He also said that there were “ominous” signs from the housing market. But housing starts actually increased 0.6% from January through November as compared to the same period in 2018. (wrong)

He predicted the dollar would weaken in 2019 and that emerging markets would, as a result, do well. The U.S. dollar index (DXY) rose approximately 1% last year (wrong) but emerging markets, based on the iShares MSCI Emerging Markets ETF (EEM), returned 18.20% (correct).

Gundlach advised against investing in Europe. But the iShares MSCI Eurozone ETF (EZU) returned 23.27% last year. (wrong)