Jeffrey Gundlach Says We’ll Have a Recession This Year
He also thinks it's possible US government debt will have to be restructured.
Another day, another high-profile investor declaring the US economy is in trouble. Jeffrey Gundlach, the CEO of investment management company DoubleLine Capital, expects a US recession as soon as this year amid the higher for longer interest rate environment.
“There’s a lot of recessionary signals out there,” he said, speaking at a webinar hosted by David Rosenberg, founder and president of Rosenberg Research. “There’s more of a recessionary feel than an inflationary feel,” he added. He also expressed concerns about the growing debt burden of the US government, fearing that it could eventually lead to a restructuring of US government debt, which would be unprecedented.
“I’ve got this crazy idea that I want to buy only the lowest coupon Treasuries … because if I have a very low coupon Treasury I don’t have to worry about being restructured,” he said. “I worry that the federal government might be forced to restructure the Treasury debt.”
Leaving this particular nightmare scenario aside, there have been signs that the US is at least in a rolling recession. RealPage, for instance, says there already is one in industries that are particularly vulnerable to interest rates.
But so many metrics point to a broadly healthy US economy. Last week S&P Global reported that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, reached 54.4 from a 51.3 reading in April, marking the highest level since April 2022.
Much will depend on when the Fed finally starts to roll back the hikes it has made to interest rates. Here’s one hopeful sign: this week the personal consumption expenditures price index minus food and energy – the Fed’s favored inflation gauge – will be released and economists surveyed by Bloomberg expect it will rise 0.2% in April, which would be the smallest advance so far this year. The overall PCE price index probably climbed 0.3% for a third month, the economists forecast and rose 2.7% on an annual basis, while the core metric is expected at 2.8% — both matching the prior month’s levels.