By Jennifer Ablan
NEW YORK (Reuters) - There will be "trouble for equity markets" if the yield on the benchmark 10-year U.S. Treasury note moves beyond 3 percent, Jeffrey Gundlach, chief executive of DoubleLine Capital, warned on Tuesday.
Late Tuesday, the 10-year yield <US10YT=RR> stood at nearly 2.38 percent.
In his first investor webcast this year, Gundlach said after the recent huge run-up in U.S. stock markets, investors should look to "peel off" their exposure to equities.
- PHOTOS: Massachusetts residents make first retail marijuana purchases 12 Pictures
- Prepare for GoT season 8 with this Game of Thrones whisky 8 Pictures
Gundlach, known on Wall Street as the 'Bond King', reiterated an investment call he made in late 2016, saying he expects markets to reverse their post-election moves.
He told Reuters in December that the strong U.S. stock market rally, surge in Treasury yields and strength in the U.S. dollar <.DXY> since Donald Trump's surprising Nov. 8 presidential victory look to be "losing steam."
Gundlach, who oversees $101 billion as of the end of December, said last month: "The bar was so low on Trump to the point people were expecting markets will go down 80 percent and global depression - and now this guy is the Wizard of Oz and so expectations are high. There's no magic here."
Gundlach said there are two major risks regarding Trump's presidency: shrinking global trade and Trump's temperament.
About interest rate hikes by the Federal Reserve this year, Gundlach said on Tuesday's webcast: "All things being equal, the Fed will hike in June." He expects two hikes this year with three possible.
Gundlach added: "I think the 10-year Treasury will go below 2.25 percent ... not below 2 percent" before edging up again.
Gundlach said "animal spirits" have been stirred by the Trump victory and that will help U.S. gross domestic product growth break out from its long-term 2 percent rate.
He said the Fed "needs to be less relaxed about things," particularly if fiscal stimulus filters through the economy.
(Reporting by Jennifer Ablan; Editing by Chris Reese and James Dalgleish)