Submitted by Taps Coogan on the 3rd of December 2019 to The Sounding Line.

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Jeffery Gundlach, founder of DoubleLine Capital, spoke with Yahoo Finance about his outlook for the US economy and markets, warning that once the next recession strikes, he does not expect the US stock market to get back to current levels within his career.

Some excerpts from Jeffrey Gundlach:

“2019 looks really strong when you look at global stocks, bonds, and gold, and Bitcoin, and just about everything. But, you have to remember that it came off of an extremely arbitrary point. Year-end was a a very low point because the fourth quarter of 2018 was incredibly weak. So, if you look at things in a broader context, markets are kind of turning around. Treasury yields have been around 2% on the 10-Year for a while. The S&P 500 and the Dow Jones have reached new highs, but stocks outside of the United States are still below where they were January 26th, 2018. So we are kind of grinding along…”

“The markets are at pretty high levels given that GDP has started to look worse. The ISM manufacturing came out today and the only way to characterize the number was ‘terrible.’ …What’s interesting is that the bond market seems to be showing some trouble signs. The dust-up in the repo market, basically to me, shows that the Fed has manipulated interest rates to a level that the market doesn’t accept. Because, if you can’t float overnight money at the level of the Fed funds rate, that means that the demand isn’t there, which reinforces my thesis that in the next recession, absent the Fed doing massive monetary purchases, interest rates at the long end of the curve would probably go up because of (over) supply problems…”

“If you weren’t expanding the national debt at all, if you were just keeping it constant, we would actually have negative nominal GDP right now. So, it’s kind of a sobering thought that the entire expansion that we’ve had in the recent several quarters is all debt based. The national debt and deficit as a percentage of GDP are at levels that, historically, have been associated with the depths of a recessions in terms of a stimulative policy.”

“I think 2019 has been just about one of the greatest, easiest years ever for investors… Just throw a dart and you’re up 15%, 20%…”

“I think that the pattern of the United States outperforming the rest of the world has already come to an end… In the late 1980s, Japan was viewed to be invincible. They were absolutely killing it. Their real-estate was booming. They were by far the strongest stock market… Then the recession came in the early 1990s and the Nikkei got completely wiped out and what’s fascinating, here 30 years later, and it still hasn’t come close to that high. Then, in the late 90s it was Europe with optimism that I think was misguided… about the Euro potentially becoming a reserve currency… and it turned out that Europe was killing it. (They) outperformed every other region in the world and then the recession came in the early 2000 and the Euro stocks got kneecapped and they have never been back to that level again. Then you had the emerging markets, with the dollar being weak in the middle of the 2000s, and the ascension of China, emerging markets were by far the strong stocks in the world, and then when the recession came, they got completely destroyed and they never made it back to that level again. So where are we today? The S&P 500 is killing everybody else over the last ten years. Almost 100% out-performance verses most other stock markets. My belief is that that pattern will repeat it self. In other words, when the next recession comes, the United States will get crushed and it will not make it back to the highs that we’re kind of floating around right now, probably for the rest of my career… Now my career doesn’t have 30 years to go, but it also doesn’t have 2 years to go…”

There is more to the interview, so enjoy the full video above.

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