Taps Coogan – August 5th, 2022

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Jeffery Gundlach, the founder of DoubleLine Capital and the manager of one of the largest funds in the world, spoke with CNBC after the Fed’s last FOMC meeting to share his thoughts about that meeting, which were actually quite positive, as well as share his overall view on markets and the economy.

 

Some excerpts from Jeffery Gundlach:

“Events can change pretty radically, but right now with the data set we’re looking at, I would say they are going to go to 3% (Fed Funds) and we’ll see that there will be enough prints, it won’t be what they are looking for on the CPI, it’s not going to go from 9.1% to 5.0% between now and year-end, but if we get three or four sequential CPI declines, I think the Fed will stop hiking… I hope they actually take a pause if there is one decline… because I think we want to see the aftermath of these rate hikes percolate through… and we have the quantitative tightening coming… I think we are getting pretty close to the end…”

“Who knows how the slowdown is going to look. We already have a slowdown in parts of the economy. Housing is obviously slowing down. Consumer demand is obviously going to be slowing down… There is so much uncertainty right now in what a normal economy looks like because of the massive dislocation of 2020 and the money printing. Job #1 is that we make it as improbable as possible that we decide that money printing is a solution for us again because that is what has gotten us into all of these problems and I am talking societal problems, I’m talking inflation problems, I’m talking rancor problems in the political discourse arena. We need to stop printing money. So, I am rooting for Jay Powell. I want him to be able to accomplish a negative economic experience but not one that is born of auto-pilot excessive tightening…”

“We can experience a little worse than we are experiencing now, but if the trap door opens up, we are going to have these Congress people and these governors putting out stimulus checks again and the inflation merry-go-round is going to go into overdrive… Why don’t we let these (rate hikes) percolate through the system. We don’t need to pile-drive the economy with another 75 (basis points)… Let’s see what happens…”

“I am going to say that a crash landing is avoidable. A softish landing is your best case, I probably wouldn’t give it great odds. I think we are going to have some noticeable economic distress but I don’t think it has to be really a freefall…”

Sounds about right. There is much more to the interview, so enjoy it above. 

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