It’s still too early, but DoubleLine CEO Jeffrey Gundlach said Tuesday that emerging market equities were poised to dramatically outperform U.S. stocks over the long term. Speaking on a webcast Tuesday, the bond fund manager said part of the reason he expected the two regions to diverge was that domestic stocks had beaten other areas over the last decade and during the recent pandemic.

Gundlach also said DoubleLine foresees “rough waters” for the fragile U.S. economy as the Federal Reserve attempts to taper its balance sheet. Ultimately, the twin trade and federal budget deficit spell long-term trouble for U.S. financial assets. “We could see tremendous underperformance of [U.S.] stocks,” he said.

The webcast was entitled “In Our Time,” in reference to British Prime Minister Neville Chamberlain’s claim to have achieved “peace in our time” after reaching a short-lived non-aggression pact with Germany in 1938. In Our Time was also the title of a collection of short stories written by Ernest Hemingway.

Gundlach compared Chamberlain’s statement to President George W. Bush’s unfortunate “mission accomplished” remark shortly after the Iraq War commenced in 2003. He also suggested President Joe Biden’s statement that the U.S. had achieved its goals in Afghanistan shortly before its disastrous withdrawal last August might someday occupy a similar place in history.

“We do not own emerging markets. We think it’s too early,” Gundlach said. But he added that they could be “the next big trade.”

Gundlach noted that after the dot-com bubble burst in 2000, emerging market stocks outperformed U.S. stocks for most of the next decade. Indeed, their ability to trounce U.S. equities for an extended period was “remarkable.” At one point in that decade, the Shiller CAPE ratio for emerging markets actually surpassed the S&P 500.

Currently, the Shiller CAPE ratio on the S&P 500 is more than double that of emerging markets. So far in 2021, Gundlach noted, the S&P is up almost 25% while many emerging markets indexes are down 20% and some are down as much as 40%. Part of this is attributable to higher vaccination rates in America, which have contributed to a faster U.S. rebound. But that means when the pandemic finally ends, the recovery in emerging markets is likely to be much sharper.

Gundlach was asked whether the Fed would unleash its arsenal of monetary medicine if the S&P 500 were to drop 20%. That’s been the case in the past and he said he “wouldn’t bet against it.”

In the fourth quarter of 2018, the fed funds rate reached 3.0%, and economic activity stalled while stocks fell 19%. “We’re likely to see more uncertainty and stress,” he predicted.