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Bloomberg
Jeffrey Gundlach gave a pessimistic tone Thursday, saying that there was a 75% chance of a recession before the next presidential election, warning that the corporate bond market is an imminent crisis.
Gundlach, CEO of DoubleLine, mockingly presented a presentation titled "The greatest economy of all time," referring to the characterization of President Donald Trump, which the famous bond investor does not share.
Gundlach, in front of a London audience, exposed a number of worrying signs, including the decline in buying indices, which peaked around the same time as the US and global stock markets.
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made.
Gundlach said neither Trump nor China would be willing to accept a trade deal, with the Chinese side waiting for the possible defeat of the outgoing President of the White House.
He also cited a New York Fed model showing a growing likelihood of a recession in the United States, but admitted that data on jobless claims were indicative of a vigorous labor market, although growth employment had slowed down.
A bear on the US dollar
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Gundlach expects further cuts in interest rates from the Federal Reserve, with the bond market set at four.
When asked about the housing market, he said that he did not see another crisis of 2008, pointing out that the quality of the subscription had changed since then, but that he thought the market would remain depressed while the Baby Boomers were trying to sell the McMansions not like and Generation Z hate them.
In corporate bonds, Gundlach predicts a crisis, noting a finding in Morgan Stanley's study that one-third of investment-grade debt should actually be rated high yield.
He said the corporate bond market had grown in size and was heavily leveraged with restrictive covenants. "So in times of recession, you will not be able to solve these problems," he said.
Retail investors have flocked to the asset class because of relatively high yields, as do pension funds of companies trying to match assets with liabilities.
Gundlach said the total return fund of his company
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never owned corporate bonds and, in other portfolios, the company was underweight at 80%.
He said that he became neutral on the gold
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– saying that it will be difficult for the yellow metal to exceed the $ 1,600 ounce – although the fact that it has hit a record in euros is a good sign of how it can do in dollars.
With respect to the asset classes that he likes, Gundlach has identified Triple-A rated secured debt securities and mortgage-backed securities that are not backed by Fannie Mae or Freddie Mac.
Gundlach also spoke at length to the London public about American politics, saying that Senator Elizabeth Warren was a strong candidate who learned during the election campaign and whose wealth tax proposal is popular among Democrats and Republicans . "I do not like what she says, but she says it very well," he said. "She is intelligent."
He was less excited by former Vice President Joe Biden, whom he nicknamed "Jurassic Joe," and Senator Kamala Harris, who, he said, had not been quick. Gundlach said he thought former Secretary of State Hillary Clinton could still get into the field, judging by a recent speech she delivered, especially if Biden was to to withdraw.
He added that Trump would not run for reelection if there was a recession, efforts to blame the Fed would not work because most Americans do not know what the central bank is.
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