Taps Coogan – November 9th, 2023

Jeffery Gundlach, the founder of DoubleLine Capital and the manager of one of the largest funds in the world, spoke with Yahoo Finance about his outlook for markets and the economy. He sees the Fed as done with rate hikes and a recession emerging in the next few quarters, but warns about the spiraling interest expense on the national debt forcing interest rates to go right back up after a recession.

 

Gundlach:

“My belief, if we’re not already in recession, is that we’ll be in recession by the second quarter of 2024…”

“What I think most investors will be surprised by is that, while interest rates will probably fall in an automatic reaction to weaker economic growth, I don’t think they’re going to stay low because of the supply problem. This fiscal problem is going to get much, much worse in a recession… Weirdly, I think we are going to have higher interest rates in the aftermath of the recessionary response. So, I think we may have lower interest rates in the first half of 2024… but then… we might have to pivot to the reality of a debt-to-GDP which is now running at 6%-8%… going to 9% of GDP. When you start to look at the arithmetic of all of this, it’s really rather troubling. Half of the debt rolls off in the next 36 months… you can just start to see what’s going to happen to the interest expense… We’re basically at that moment where it’s not our grandchildren’s problem, it’s not our children’s problem, it’s our problem and what investors have been trained to think they understand is a secularly falling interest rate regime… Interest rates are not falling anymore on a secular basis…”

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