(Adds Gundlach comments on U.S., emerging market stocks)
By Sam Forgione
NEW YORK, May 8 (Reuters) - Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital, said on Monday that investors should buy the iShares MSCI Emerging Markets exchange-traded fund, short an ETF tracking the S&P 500, and leverage it one time.
Gundlach, speaking at the Sohn Investment Conference in New York City, said U.S. stocks could continue to grind higher into the middle of the year or beyond but that there was "just not a lot of upside." He said the trend since 2010 of the S&P 500 out-performing emerging market stocks had been "broken."
"It's already starting to work in terms of favoring emerging markets versus S&P 500, just on an index fund basis," said Gundlach, who oversees more than $100 billion in assets at Los Angeles-based DoubleLine and is known on Wall Street as the "Bond King."
He said that the cyclically adjusted price-earnings or "CAPE" ratio of emerging markets was half that of the United States.
Gundlach said that, while some investors avoid buying emerging market assets on fears that tighter Federal Reserve policy will lead to a stronger dollar, such a view that hawkish Fed policy necessarily means a stronger greenback was a "myth."
Gundlach also called passive investing a "myth" and said he was neither bullish nor bearish on the dollar. He told the conference he had opened a Twitter account "@TruthGundlach." (Reporting by Sam Forgione; Editing by Meredith Mazzilli and Grant McCool)