Billionaire Jeffrey Gundlach, also known as the “King of Bonds,” has warned of “painful outcomes ahead of the next recession.” Commenting on the Fed’s attempt to curb inflation, he warned: “The more you try to reduce the severity of problems, you end up with a very high severity problem.”
‘Bond King’ Jeffrey Gundlach on the coming recession
Jeffrey Gundlach, chief executive officer and chief investment officer of investment management firm Doubleline, shared his perspective on the US economy in an interview with Yahoo Finance last week. Gundlach is nicknamed “the Bond King” after he graced the cover of Barron’s as “The New Bond King” in 2011. According to Forbes, his net worth is currently $2.2 billion.
“It doesn’t matter if it’s a soft landing or a hard landing,” he began. “People always ask me this question: ‘How bad will the recession be?’ It doesn’t matter, as long as we enter a recession, you have to have a certain degree of protection. Gundlach added:
We could see some really interesting and painful results in the next downturn, whether it’s very bad or not.
He noted that one indicator “that is the key to the recession is if the unemployment rate crosses its 36-month, three-year moving average,” stressing: “We’re pretty far from that, but that doesn’t happen on the front of a recession. If that happens, it suggests you’re in more of a hard-landing type of recession.”
The billionaire explained that the Federal Reserve, “in a roundabout way… are predicting a recession themselves” because they said in December that “the unemployment rate would end this year at about 4.6%, up 100 basis points.” He emphasized: “Historically, when you get more than a 50 basis point increase in the unemployment rate, you have never avoided a recession.”
Gundlach further explained: “When you have this, more or less, try to never have a significant downturn in the economy: Federal Reserve to the rescue, zero interest rates, quantitative easing, what you’re trying to do is avoid any kind of hard landing. . ever.” He continued: “That kind of activity violates Gundlach’s rule of financial physics, which is that the frequency of problems multiplied by the severity of problems equals a constant.” The billionaire opined:
The more you try to reduce the severity of the problems, the more you end up with a very high severity problem.
Do you agree with billionaire Jeffrey Gundlach on the American economy? Let us know in the comments section.
image credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or a solicitation of an offer to buy or sell, or a recommendation or endorsement of any product, service or company. bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
